Question L$2[25$ Points$]$

You are about to start a new project. The project will require an initial investment of $40,000$ that will be depreciated straight$-$line over $4$ years, which is the life of the project. The depreciation tax shield is as risky as the project assets. The unlevered return on equity is $6\mathrm{.}50\%$ while the cost of debt $($interest rate$)$ is $3\mathrm{.}50\%.$ The corporate tax rate is $34\%.$ The company will issue $30,000$ worth of debt that will be reimbursed according to a predetermined schedule. The table below reports the EBITDA and outstandingdebt values at the end and beginning of each year, respectively.

$\backslash$table$[[$YEAR$,1,2,3,4],[$EBITDA $($End of year$),12,000,14,000,23,000,11,000],[$DEBT $($Beginning of year$),30,000,20,000,20,000,5,000]]$

a$)$ Compute the unlevered value of the assets at time $0.[10$ Points$]$

b$)$ Compute the NPV of the project. $[5$ Points$]$

c$)$ Compute the levered return on equity for each one of the $4$ years. $[10$ Points$]$