Your firm is considering a $ 190 million investment to launch a new product line. The project is expected to generate a free cash flow of $ 14 million per year, and its unlevered cost of capital is 11 %. To fund the investment, your firm will take on $ 114 million in permanent debt.

a. Suppose the marginal corporate tax rate is 21 %. Ignoring issuance costs, what is the NPV of the investment?

b. Suppose your firm will pay a 2 % underwriting fee when issuing the debt. It will raise the remaining $ 76 million by issuing equity. In addition to the 5 % underwriting fee for the equity issue, you believe that your firm's current share price of $ 46 is $ 4 per share less than its true value. What is the NPV of the investment in this case? (Assume all fees are on an after-tax basis.)