You are a consultant who has been hired to evaluate a new product line for Markum Enterprises. The upfront investment required to launch the product line is $8 million. The product will generate free cash flow of $0.73 million the firstyear, and this free cash flow is expected to grow at a rate of 3% per year. Markum has an equity cost of capital of 11.8%, a debt cost of capital of 9.02%, and a tax rate of 40%. Markum maintains adebt-equity ratio of 0.80.

a. What is the NPV of the new product line(including any tax shields fromleverage)?

b. How much debt will Markum initially take on as a result of launching this productline?

c. How much of the productline's value is attributable to the present value of interest taxshields?