Photochronograph Corporation (PC) manufactures date train photographic equipment. It is currently at its target score-equity kindred of .60. It’s because erection a new $65 pet manufacturing dexterity. This new establish is expected to originate aftertax coin flows of $9.4 pet in fixity. The congregation raises all equity from without financing. There are three financing options:
A new progeny of sordid fund: The flotation requires of the new sordid fund would be 8 percent of the total amending. The required repay on the congregation’s new equity is 14 percent.
A new progeny of 20-year bonds: The flotation requires of the new bonds would be 4 percent of the allowance. If the congregation progenys these new bonds at an annual coupon reprove of 8 percent, they accomplish hawk at par.
Increased use of accounts payable financing: Because this financing is keep-akeep-apart of the congregation’s ongoing daily concern, it has no flotation requires, and the congregation assigns it a require that is the selfselfsame as the overall immovable WACC. Management has a target kindred of accounts payable to long-term score of .15. (Assume there is no estrangement betwixt the pretax and aftertax accounts payable require.)
What is the NPV of the new establish? Assume that PC has a 21 percent tax reprove. (Do not complete interposed calculations and penetrate your apology in dollars, not pets, rounded to the rectilinear unimpaired sum, e.g., 1,234,567.)