Question 5 Company A has a debt of $25,000,000 while its equity is $115,000,000. The beta of A's levered equity is 0.95 and the company keeps a constant debt-to- equity ratio. Company A's cost of debt is 4.35% and it bears no systematic risk. The expected return of the market portfolio is 9%. In the near future Company B is starting a new project with a life of 5 years, with asset similar to the assets of Company A. Company B will need to acquire new fixed assets for $12,450,000 in order to start the project. These assets will be depreciated straight-line through the life of the project. The CFO of the company has chosen to raise 113 of the necessary funds for the new project as debt, and 2/3 as equity. Moreover the debt level for the project will be kept constant through its life, and it bears no systematic risk. The corporate tax rate is 24%. (a) What is the unlevered return on equity of the new project of Company B? The assets of Company B?s project produce a constant expected EBITDA of $4,560,000 per year for the next 5 years, and the depreciation tax shield has a risk profile comparable to the risk of company?s debt. (b) What is the annual after-tax cash flow to equity holders from the new project at the end of each of the five years of its life? (c) What is the project?s NPV