Huata Ltd has 500,000 ordinary shares outstanding with a beta of 1.4, and the current share price is $1.6.  The dividend yield is 5.7 percent and dividends increase by 4.2 percent annually. The company has issued $450,000 of bonds that are selling at 2% above their nominal/face value offering a yield to maturity of 6.8 percent. The tax rate is 35 percent. The firm is considering a project that has the same risk level as the firm’s current operations, an initial cost of $328,000 and cash inflows of $52,500, $155,000, and $225,000 for Years 1 to 3, respectively.

a. What is the NPV of the project?

b. If tax rates decline explain the impact on the Projects NPV.

c. If the market value of the bonds dropped 2%, then what would be the impact on the NPV?