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You are a consultant who has been hired to evaluate a new product line for Markum...

You are a consultant who has been hired to evaluate a new product line for Markum Enterprises. The upfront investment required to launch the product line is 10 million. The product will generate free cash flow of .73 million the first​ year, and this free cash flow is expected to grow at a rate of 5% per year. Markum has an equity cost of capital of 11.5%​, a debt cost of capital of ​5.16%, and a tax rate of 42%. Markum maintains a​ debt-equity ratio of .50.

a. What is the NPV of the new product line​ (including any tax shields from​ leverage)?

b. How much debt will Markum initially take on as a result of launching this product​ line?

c. How much of the product​ line's value is attributable to the present value of interest tax​ shields?

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

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