Final answer:
To calculate the NPV of a project after external financing costs, subtract the issue costs from the estimated NPV. For a $19.12 million project with $14.598 million NPV and 3.2% debt issue costs, the NPV after costs would be approximately $13.98616 million.
Step-by-step explanation:
To calculate the NPV of the project, we need to consider the cost of external financing. The project requires $19.12 million in financing and has an estimated NPV of $14.598 million. The issue costs for the debt will be 3.2% of the face value. To calculate the NPV, we subtract the issue costs from the estimated NPV.
You are considering issuing debt to finance a new project which needs $19.12 million and has an estimated NPV (Net Present Value) of $14.598 million. When calculating the NPV of the project including the cost of issuing debt, you need to account for the issue costs at 3.2% of the face value. To find the NPV of the project after considering the issue costs, you need to subtract the issue costs from the estimated NPV:
Issue costs = $19.12 million * 3.2% = $0.61184 million
NPV after issue costs = $14.598 million - $0.61184 million = $13.98616 million
Therefore, the NPV of the project, after accounting for the costs of external financing, is approximately $13.98616 million.