Answer each question and show your work.

1. $1,400 is received at the beginning of year 1, $2500 is received at the beginning of year 2, and $3,600 is received at the beginning of year 3. If these cash flows are deposited at 12 percent, what will be their combined future value at the end of year 3?

1. XYZ Co. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial investment would be $3,500,000 and the project would generate incremental cash flows of $800,000 per year for six years. The cost of capital is 10 percent. Please calculate the following:
2. 1. Pay back period (PBP)
   2. Calculate the Net present value (NPV)
   3. Calculate the Profitability index (PI)
   4. Calculate the Internal rate of return (IRR)
   5. Should this project be accepted?
   6. If cost of capital change to 12%,what will be the payback period and IRR?

1. XYZ Company has a target capital structure of 55% common stock, 35% debt, and 10% preferred stock. The company wishes to issue a new bond ($1,000 par value) with 12% coupon rate and 30 years to maturity. The flotation costs will be $20 and the bond has to be sold at 5% discount. To issue new preferred stock the company has to pay $2 as flotation cost. The market value of preferred stock is $8 and stock will pay $1 dividend. New common stocks will cost the company $2. The expected dividend is $3 and the market value is $19 and a growth rate of 5%. Tax rate is 35%. What is the weighted average cost of capital?

4. On the most basic level, if a firm's WACC is 12 percent , what does this mean? Also is the cost of capital is the same as rate of return?