The market-value balance sheet and other financial data for Company XXX are listed below.

Asset value $1,000,000 Debt $500,000

Equity $500,000

$1,000,000 $1,000,000

Cost of debt 6%

Cost of equity 12%

Marginal tax rate 21%

You are the financial manager of company XXX is considering a project that requires $300,000 investment today and expects to generate a perpetual cash flow of $30,000 each year (after-tax). This after-tax cash flow takes no account of interest tax shields on debt supported by the project. Assume no depreciation. The company issues $90,000 debt at 6% interest rate to finance the project and will keep the debt amount fixed once issued. The issue cost of debt is $2,000. You want to calculate APV of the project (keep four decimals including percentage to avoid rounding error).

(a). Whats cost of capital used to calculate base-case NPV (in %)? %

(b). Whats base-case NPV? $

(c). What's the interest tax shield each year? $

(c). Whats PV of interest tax shields? $

(d). What's the APV of the project considering both PV of interest tax shield and issue cost? $