AutoSave OFF A A CGP ... w- FIN 2305 - Assignment 3 - Compatibility Mode - Saved to my Mac Home Insert Draw Design Layout References Mailings Review View ? Tell me Comments Editing Share Calibri (Bo... v 11 A A Aa A AaBbCcDdEe AaBbCcDdEe AaBbCcD AaBbCcDdE AaBb Paste BIUvab X X A DAY Norma No Spacing Heading 1 Heading 2 Title Styles Dictate Sensitivity Editor Pane U and InTIOWS OT $300 at the end of Years 1-5. Ine new cost Of capital IS 10%. He asks you to calculate the project's modified IRR (MIRR) (5 marks) Part C: Calculating WACC and the Cost of Preferred Stock (15 points) 11. Your boss asks you to look at East Africa Airways. It has debt with a book value of $20M, currently trading at 85% of book value. It also has book value of equity of $30M, and 2M shared of common stock tracing at $4.75 per share. What weights should be used for debt ad equity in calculating its WACC? (3 points) 12. Your boss is keen for you to learn more about Airlines. South American Airlines' (SAA) shares are currently trading at $69.25 each. The yield on the company's debt is 4% and the firm's beta is 0.7. The T-Bill rate is 4% and the expected return on the market (E (KM)) is 9%. The company's target capital structure is 25% debt and 75% equity. The company pays a combined income tax rate of 35%. The GST rate is 13%. What is SAA's cost of equity? (3 marks) 13. Using the information outlined in #11, calculate SAA's cost of debt (after tax). (3 marks) 14. What is SAA's weighted average cost of capital? (3 marks) 15. SAA's key rival, Maskati Air has a 7 percent preferred stock outstanding that is currently selling for $48 a share. The preferred stock has a $100 par value. The market rate of return is 10 percent and the firm's tax rate is 34 percent. GST is 13%. What is Maskati's cost of preferred stock? (3 marks) Submission: Please submit your completed assignment by the due date identified above through the link in the Assignments section of Blackboard. Late submissions are penalized 20% for each full or part day past due. While it is preferable to submit all your work in a single word file document, you may submit one word file and one excel file if you wish. Assessment Criteria: the rubric for the Assignment is on the final page of this document. Questions: please contact me via email - see blackboard for my email address. Page 3 of 4 1371 words X English (Canada) Ex Accessibility: Investigate Focus E + 124%