ABC Inc.$\text{'}$s capital structure is $55\%$ debt, $20\%$ preferred, and $30\%$ common equity, and its tax rate is $25\%.$ For financing, $($a$)$ ABC sold a non$-$callable bond several years ago that now has $15$ years to maturity with $8\%$ annual coupon, paid semiannually, at a price of $$1,055,$ and a par value of $$1,000.($b$)$ ABC sold a perpetual preferred stock for $$95\mathrm{.}50$ per share, with a $$7\mathrm{.}50$ annual dividend and a flotation cost of $3\mathrm{.}00\%$ of the price. $($c$)$ ABC also has beta $=1\mathrm{.}2,$ risk free rate of return rRF $=6\mathrm{.}00\%$; market risk premium RPM $=7\mathrm{.}00\%$;

The question is: What is the company's WACC?

ABC is considering a project that has the following cash flow and WACC data.

$($a$)$ What is the project's NPV$?$

$($b$)$ What is the project's IRR

$($c$)$ What is the project$$s MIRR?

$($d$)$ Should the project be accepted? Why?

WACC: The result of $(1)$ above

Year $012345$

Cash flows $-$$$1,200$ $$410$ $$370$ $$350$ $$330$ $$310$

ABC is now considering changing the debt ratio and moving it to the new debt$/$assets ratio as indicated below, and replacing all preferred stocks with debt. The money raised would be used to repurchase preferred stock at the current price. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below. If this plan were carried out,

$($a$)$ By how much would the WACC change, i$.$e$.,$ what is WACCNew $-$ WACCOld $($WACC $($in question $(3))$ WACC $($in question $(1)$ or $(2))?$

New Debt$/$Assets $40\%$ Interest rate new $=$ rd $7\mathrm{.}0\%$

New Equity$/$Assets $60\%$ New cost of equity $=$ rs $13\mathrm{.}0\%$

$($b$)$ Based on the Hamada equation, what would the firm's beta be if it used no debt, i$.$e$.,$ what is its unlevered beta?

ABC is planning its operations for next year, and wants to forecast the firm's additional funds needed $($AFN$).$ Data for use in the forecast are shown below. Based on the AFN equation, what is the AFN for the coming year? Dollars are in millions.