Question $5$

Photochronograph Corporation $($PC$)$ manufactures time series photographic equipment. It is currently at its target debt$-$equity ratio of $\mathrm{.}45.$ it's considering building a new $$55$ million manufacturing facility. This new plant is expected to generate aftertax cash flow of $$7\mathrm{.}4$ million in perpetuity. There are three financing options:

a$)$ A new issue of common stock: The required return on the company's new equity is $15$ percent.

b$)$ A new issue of $20-$year bonds: if the company issues these new bonds at an annual coupon of $7$ percent, they will sell at par.

c$)$ Increased use of accounts payable financing: Because this financing is part of the company's ongoing daily business, the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long$-$term debt of $15($Assume there is no difference between the pretax and aftertax accounts payable cost.$)$

What is the NPV of the new plant? Assume that the company has a $35$ percent tax rate.