3 The Company is considering a project that will require an initial outlay of $54,200. This project has an expected life of five years and will generate aftertax cash flows to the company as a whole of $20,608 at the end of each year over its fiveyear life. In addition to the $20,608 cash flow from operations during the fifth and final year, there will be an additional cash flow of $13,200 at the end of the fifth year making cash flow in year 5 equal to $33,808. Use cost of capital from question No 2. Calculate the following:

1. Payback
2. Discounted payback
3. Net present value
4. Profitability index
5. Internal rate of return
6. MIRR
7. Should the project be accepted?

QUESTION 2 IS DEFIED BELOW:

A company has the following capital structure: (6)

	Book Value	Market Value
Debt outstanding	$8 million	$10.5 million
Preferred stock outstanding	$2 million	$1.5 million
Common stock outstanding	$10 million	$13.7 million
Total capital	$20 million	$25.7 million

• Tax Rate: 35%.
• Given that a firms return on equity is 18% and management plans to retain 40% of earnings for investment purposes, what will be the firms growth rate constant?
• Company has paid of $7 per share will grow constant forever above rates (use growth rate). The Market price of the shares is expected to be 67 at the end of the year. Calculate cost of Equity, Ks?
• The company's preferred stock sells for $40 a share and pays an annual dividend of $4 per share
• A bond that matures in 7 years sells for $1,020. The bond has a face value of $1,000 and a yield to maturity of 10.5883 percent. The bond pays coupons semiannually. What is the bonds current yield?

Calculate:

1. Growth Rate
2. Cost of Equity
3. Cost of Preferred Stock
4. Current Yield
5. WACC