Singer inc. is about to start a 4-year project. A new plant will be built. The plant will require an amount of $40 million to acquire new fixed assets that will be depreciated straight-line through the life of the project. The company also possesses a building that it bought for $5 million and has a net book value of 0. Today's market value for the building is $4.1 million, while it can be rented for $220,000 yearly. The company wants to situate its new plant in this building. The following are today's market data for Singer (that is before the project starts):

Debt: $240,000,000. Interest rate: 7.5%. The debt amount is kept constant.

Common stocks: 9,500,000 shares outstanding. Stock price: $63.

The levered equity Beta is 1.2. Market: 8% expected market risk premium, 5% risk free rate. JP Simon Bank charges Singer $1,040,000 as an underwriter fee on new common stock issues (i.e. the cost of helping Singer issue stocks). Singer will raise the funds needed for the project by only issuing stocks. The corporate tax rate is 35%. The project will be managed in total separation from the other operations of the firms.

(a) Calculate the new project's initial (time 0) cash flow.

(b) The new project has a risk prole comparable with the riskiness of its assets in place. What is the appropriate opportunity cost of capital for the project? The company will incur $4,000,000 in annual administrative costs. The plant will manufacture 20,000 widgets per year and sell them for $6,900 each. The unit production cost is $5,400.

(c) What is the annual after-tax cash ow from the new project at the end of each of the four years of its life?

(d) Assuming that the depreciation tax shield is as risky as the company's debt, what is the project's NPV?