Question: 1a. Consider the two projects below. What is the crossover point for the two projects? Period Project 1 CF Project 2 CF 0 -500 -400

1a.

Consider the two projects below. What is the crossover point for the two projects?

Period Project 1 CF Project 2 CF

0

 -500 -400
1 100 250
2 150 200
3 200 150
4 250 100
5 300 50

1b.

Calculate the WACC for a firm with the following characteristics:

Shares Outstanding: 1.5 million

Share Price: $13.76

Face Value of Debt: $9.9 million

YTM on Debt: 5.9%

Coupon Payments: $25 every six months

Time to Maturity on Debt: 11 years

Beta = 1.25

Risk-Free Rate=2.5%

Expected Return on Market = 9.9%

Tax Rate=33%

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