Answer Happy

First and Ten Corporation’s stock returns have a covariance
with the market portfolio of .0471. The standard deviation of the
returns on the market portfolio is 22 percent and the expected
market risk premium is 7.2 percent. The company has bonds
outstanding with a total market value of $56.1 million and a yield
to maturity of 6.3 percent. The company also has 5.3 million shares
of common stock outstanding, each selling for $40. The company’s
CEO considers the firm’s current debt-equity ratio optimal. The
corporate tax rate is 21 percent and Treasury bills currently
yield 3.7 percent. The company is considering the purchase of
additional equipment that would cost $54.5 million. The expected
unlevered cash flows from the equipment are $18.05 million per year
for 5 years. Purchasing the equipment will not change the risk
level of the firm.
Calculate the NPV of the project. (Do not round
intermediate calculations and enter your answer in dollars, not
millions of dollars, rounded to 2 decimal places, e.g.,
1,234,567.89)