You are looking at a project that will generate free cash flow after covering expenses at the end of first year of $100,000 but it will require an initial investment of $75,000. The current risk free rate is 4% but given the risk profile of this project, you believe that a 9% risk premium is appropriate.

A) What is the NPV of the project? Type out your work and answer directly below.

B) If you fund the company fully with equity, what is your projected initial value of the unlevered equity/what would you expect others would be willing to pay for the equity? Type out your work and answer directly below.

C) If you instead fund the full initial investment necessary with debt, borrowing at the risk free rate, what is the initial market value of the levered equity? Type out your work and answer directly below.

D) If the projected free cash flow plays out as expected, what is the expected return over the year on the equity without leverage as indicated in Part b above (%)? Type out your work and answer directly below.

E) If the projected free cash flow plays out as expected, what is the expected return over the year on equity with leverage as indicated in Part c above (%)? Type out your work and answer directly below.

F) Per your answers above in part d and part e, if cash flows remain the same, is the expected return on equity higher, the same, or lower with leverage, and why is this the case? Type out your work and answer directly below.