Grim Enterprises is considering a new product line that requires

Grim Enterprises is considering a new product line that requires a new machine. It will cost $24,000,000. It will be fully depreciated to a zero book value on a straight line basis over 3 years. The project will generate $75,000,000 in sales each year for 3 years. Operating costs are 81% of sales per year for 3 years. Grim will have $800,000 annually in interest expense as part of the financing. The tax rate is 40%. Grim estimates the unlevered cost of capital as 14%. Note: Costs do not include depreciation or interest expense. ,a. Find the base-case net present value (NPV). ,b. Suppose the project will be financed with $10,000,000 in bonds. The bonds have a 3-year life, a coupon rate of 8% and a yield of 8%. The remaining funds will come from retained earnings. Find the adjusted present value (APV). ,