FTE (Flow To Equityholder) method

You have a project that costs $60,000 at time 0 and which will then generate after tax cash flows of 10,000 per year for 9 years, followed by a cost of $8,000 in year 10. The cost of equity for your all-equity firms is 8%. The corporate tax rate is 40% and $30,000 of the projects cost could be funded with debt with a yield of 5%.

a. What is the yearly after-tax interest expense?

b. What is the levered cost of equity? (Click to select)8%8.9%9.8%5%

c. What is the NPV using this approach? (use the levered cash flows and the levered cost of equity)