A project is being considered by Ray's Racks, a company that makes bike racks. The project is in the company's existing scope of business and similar risk to their existing product lines.

Year	0	1	2	3	4	5	6
Total cash flow ($K)	6,020	1,865	2,188	3,153	3,315	2,508	2,218

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Use this detail to determine answers to the questions below.

Rays Racks is a publicly traded company. The current stock price is $3.00 per share, and there are 20 million shares outstanding. The present value of the companys debt is $40,000,000. The company has a bond issue outstanding with 6 years to maturity. The face value is $1,000, the coupon rate is 8% (paid quarterly), and the bond is currently selling for $1,020. The companys corporate tax rate is 35% and their beta is 1.41. The current risk free rate is 5%, and the historic market return is 12%.

NOTE: It is critical that you do not round intermediate calculations. For example, while you may provide the after-tax cost of debt rounded to two decimal places, DO NOT calculate the WACC using rounded numbers. DO NOT calculate the NPV using a WACC that was rounded to two decimal places. These will give you incorrect answers. Provide each answer as requested, but DO NOT round intermediate calculations.

Answer the following questions based on the above-

Question 1

What is Ray's Rack's cost of equity? (Round your answer to two decimal places and enter as a percent, not a decimal. For example, 12.39 rather than 0.1239. Do not enter any special characters such as % or $.)

Question 2

What is Ray's Rack's pre-tax cost of debt? (Round your answer to two decimal places and enter as a percent, not a decimal. For example, 12.39 rather than 0.1239. Do not enter any special characters such as % or $.)

Question 3

What is Ray's Rack's after-tax cost of debt? (Round your answer to two decimal places and enter as a percent, not a decimal. For example, 12.39 rather than 0.1239. Do not enter any special characters such as % or $.)

Question 4

What is the weighting to be used for equity in the WACC calculation? (Round your answer to two decimal places and enter as a percent, not a decimal. For example, 12.39 rather than 0.1239. Do not enter any special characters such as % or $.)

Question 5

What is the weighting to be used for debt in the WACC calculation? (Round your answer to two decimal places and enter as a percent, not a decimal. For example, 12.39 rather than 0.1239. Do not enter any special characters such as % or $.)

Question 6

What is the WACC for Ray's Racks? (Round your answer to two decimal places and enter as a percent, not a decimal. For example, 12.39 rather than 0.1239. Do not enter any special characters such as % or $.)

Question 7

What is the project's NPV? (Give your answer in thousands of dollars ($K) just as the data was provided, rounded to ZERO decimal places. Do not enter any special characters such as % or $.)

Question 8

Based on the NPV, should the project be done?

Group of answer choices

Yes

No

Question 9

What is the project's IRR? (Round your answer to two decimal places and enter as a percent, not a decimal. For example, 12.39 rather than 0.1239. Do not enter any special characters such as % or $.)

Question 10

Based on the IRR rule, should this project be accepted?

Group of answer choices

Yes

No