Juiceworks currently operates in Milwaukee and is considering an expansion of its operations to Chicago. In order to do so, Juiceworks would have to pay a one-time cost of $10M today to establish its operations. The company would then receive after-tax expected cash flows of $6M per year for the next 8 years. The beta of the expansion is 0.9, which is the same as the beta of the firm. Assume a risk-free rate of 3 percent and a market risk premium of 5 percent. a) What is the NPV of the expansion? (6 points) Juiceworks plans to fully finance the initial cost of this operation by issuing a single bond. The bond has a coupon rate of 5 percent, a face value of $10M, a maturity of 8 years, and a beta of 0.25. Assume a tax rate of 40 percent, a risk-free rate of 3 percent, and a market risk premium of 5 percent. b) Calculate the present value of the tax shield cash flows from this bond. Assume that the discount rate for the tax shield cash flows is the same as the expected return on the bond cash flows. (6 points) According to your analysis of this firm, there is a 30 percent chance that the firm will default on the face value repayment of this bond at maturity (t=8). In this state, the firm will incur a one-time bankruptcy cost of $15M at t=8. Assume that the discount rate for expected bankruptcy costs is the same as the expected return of the firm. c) Calculate the present value of the expected bankruptcy cost because of this bond issuance. (4 points) d) Based on your previous answers, what is the APV of the proposed expansion? (4 points)