A project costs $1 million and has a base-case NPV of exactly zero (NPVsign. Enter your answers in dollars, not millions of dollars.)O). (A negative answer should be indicated by a minusa. If the firm invests, it has to raise $600,000 by a stock issue. Issue costs are 17.25% of net proceeds. What is the project's APV?Adjusted present valueb. If the firm invests, there are no issue costs, but its debt capacity increases by $600,000. The present value of interest tax shields onthis debt is $86,000. What is the project's APV?Adjusted present value

a.Calculation of Adjusted Present Value:

Answered: A project costs $1 million and has a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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