Question: A project costs $ 1 million and has a base - case NPV of exactly zero ( NPV = 0 ) . Note: A negative

A project costs $1 million and has a base-case NPV of exactly zero (NPV =0).
Note: A negative answer should be indicated by a minus sign. Enter your answers in dollars, not millions of dollars.
a. If the firm invests, it has to raise $690,000 by a stock issue. Issue costs are 19.75% ofnetproceeds. What is the projects APV?
b. If the firm invests, there are no issue costs, but its debt capacity increases by $690,000. The present value of interest tax shields on this debt is $95,000. What is the projects APV?

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