Consider a project lasting one year only. The initial outlay is $1,000 and the expected inflow is $1,200. The opportunity cost of capital is r = .20. The borrowing rate is r D = .10, and the tax...

Consider a project lasting one year only. The initial outlay is $1,000 and the expected inflow is $1,200. The opportunity cost of capital is r = .20. The borrowing rate is r
_D
= .10, and the tax shield per dollar of interest is T_c= .35.

a. What is the project’s base-case NPV?

b. What is its APV if the firm borrows 30% of the project’s required investment?