1. The Advanced Security Company is deciding whether it should accept or reject a corporate project based on its net present value. The firm estimates the project will have an initial cost of $1,310,000 and will generate after-tax cash inflows of $495,000 per year for the next 4 years. Assume the project is equally as risky as the overall firm.

The firm has 65,000 bonds outstanding that each have a face value of $1,000, mature in 16 years, have a coupon rate of 4.5 percent, and pay interest semiannually. The bonds are priced at 91 percent of face value. The firm also has 570,000 shares of common stock outstanding that are trading at $149 per share. The risk-free rate of return is 3.25 percent, the company has a beta of 1.62, and the expected market return is 10.45 percent.

The firm has no preferred stock outstanding. Assume the corporate tax rate is 21 percent.

What is the NPV of this project? Should it be accepted or rejected based on its NPV?

Please show work by hand. Excel does not help.