Your firm is considering a $230 million investment to launch a new product line. The project is expected to generate a free cash flow of $15 million per year, and its unlevered cost of capital is 12%. To fund the investment, your firm will take on $138 million in permanent debt.

a. Suppose the marginal corporate tax rate is 29%. Ignoring issuance costs, what is the NPV of the investment?

b. Suppose your firm will pay a 1% underwriting fee when issuing the debt. It will raise the remaining $92 million by issuing equity. In addition to the 4% underwriting fee for the equity issue, you believe that your firm's current share price of $38 is $7 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.)