Bob's Is a Retail Chain of Specialty Hardware Stores

Bob's is a retail chain of specialty hardware stores.The firm has 18,000 shares of stock outstanding that are currently valued at $82 a share and provide a rate of return of 13.2 percent.The firm also has 600 bonds outstanding that have a face value of $1,000, a market price of $1,032, and a coupon rate of 7 percent.These bonds mature in 7 years and pay interest semiannually.The tax rate is 35percent.The firm is considering expanding by building a new superstore.The superstore will require an initial investment of $9.3 million and is expected to produce cash inflows of $1.07 million annually over its 10-year life.The risks associated with the superstore are comparable to the risks of the firm's current operations.The initial investment will be depreciated on a straight line basis to a zero book value over the life of the project.At the end of the 10 years, the firm expects to sell the superstore for an aftertax value of $4.7 million.Should the firm accept or reject the superstore project and why?

A) Accept; The project's NPV is $1.27 million.
B) Accept; The NPV is $4.89 million.
C) Reject; The NPV is $1.06 million.
D) Reject; The NPV -$1.15 million.
E) Reject; The NPV is -$5.71 million.