Use the following information to answer the next two questions.

i = rdebt = 7%

Ku= rasset = 15%

Kl=requity = 24.9%

K= rWACC = 11.20%

Tax rate = 40%

The 5-year project requires equipment that costs $200,000. If undertaken, the shareholderswill contribute $80,000 cash and borrow $120,000 with an interest-only loan with a maturityof 5 years and annual interest payments. The equipment will be depreciated straight-line tozero over the 5-year life of the project.

(a) When using the APV methodology, what is the NPV of the depreciation tax shield?

(b) When using the APV methodology, what is the NPV of the interest tax shield?