Photochronograph Corporation (PC) manufactures time-series photographic equipment. It is currently at its target debt? equity ratio of...

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Photochronograph Corporation (PC) manufactures time-seriesphotographic equipment. It is currently at its target debt? equityratio of .65. It’s considering building a new $58 millionmanufacturing facility. This new plant is expected to generateafter-tax cash flows of $4.9 million in perpetuity. The companyraises all equity from outside financing. There are three financingoptions:
1. A new issue of common stock: The flotation costs of the newcommon stock would be 6.5percent of the amount raised. The requiredreturn on the company’s new equity is 10 percent.
2. A new issue of 20-year bonds: The flotation costs of the newbonds would be 2.1 percent of the proceeds. If the company issuesthese new bonds at an annual coupon rate of 4 percent, they willsell at par.
3. Increased use of accounts payable financing: Because thisfinancing is part of the company’s ongoing daily business, it hasno flotation costs, and the company assigns it a cost that is thesame as the overall firm WACC. Management has a target ratio ofaccounts payable to long-term debt of .10. (Assume there is nodifference between the pre-tax and after-tax accounts payablecost.)
What is the NPV of the new plant? Assume that PC has a 21percent tax rate.
NPV $

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Photochronograph Corporation (PC) manufactures time-seriesphotographic equipment. It is currently at its target debt? equityratio of .65. It’s considering building a new $58 millionmanufacturing facility. This new plant is expected to generateafter-tax cash flows of $4.9 million in perpetuity. The companyraises all equity from outside financing. There are three financingoptions:1. A new issue of common stock: The flotation costs of the newcommon stock would be 6.5percent of the amount raised. The requiredreturn on the company’s new equity is 10 percent.2. A new issue of 20-year bonds: The flotation costs of the newbonds would be 2.1 percent of the proceeds. If the company issuesthese new bonds at an annual coupon rate of 4 percent, they willsell at par.3. Increased use of accounts payable financing: Because thisfinancing is part of the company’s ongoing daily business, it hasno flotation costs, and the company assigns it a cost that is thesame as the overall firm WACC. Management has a target ratio ofaccounts payable to long-term debt of .10. (Assume there is nodifference between the pre-tax and after-tax accounts payablecost.)What is the NPV of the new plant? Assume that PC has a 21percent tax rate.NPV $