7. On the other hand, Evergreen company is also considering replacing one of its old production lines with a new one with an advanced technology. It has undergone a market research last year that costed $120K which showed that there is an increase in demand for such a new technology I The new production line will cost $3M and is expected to have a salvage value in 6 years for $750K. The existing production line was bought 2 years ago for $1.2M, and can be sold today at a market value of $SOOK. If not sold now, this old machinery is expected to have a salvage value of $100K in 6 years. The project is expected to generate sales in year 1 for $4.2M and thereafter sales are forecasted to grow by 6% a year for the coming 6 years. This is as opposed to the current production line which was expected to generate $3.5M of sales next year and grows by 2% for the coming 6 years. Manufacturing costs are the same under both production lines. The new project requires an initial investment in working capital of $400k. Thereafter working capital is forecasted to grow at the same growth rate of revenues of 6% (CCA rate is 20% the asset dass will remain open, tax rate is 40% & discount rate is 15%). Calculate the NPV DA (18 Points) 10. If the financial Manager of Evergreen wants to decrease its cost of capital by adding more debt to its capital structure and arrive at a debt-equity ratio of 0.60. If its debt is in the form of a 6% semiannual bond issue outstanding with 15 years to maturity. The bond currently sells for 95% of its face value of $1000. On the other hand, suppose the risk-free rate is 3% and the market portfolio has an expected return of 9% and the company has a beta of 2. If the tax rate is 40%, calculate: The company's after-tax cost of debt (7 points) Enter your