D Question 19 3 pts Application: Given the headline "North Korea signs peace treaty with South Korea," would this likely cause an increase, or decrease, in the price of Peet's Coffee (from the previous problem)? O An increase because the lowered risk of nuclear war means investors will likely get higher returns, which leads to a higher expected return and a higher stock price O An increase because the lowered risk of nudear war mears potential investors will not need to be compensated as much with a higher return, which can happen from paying more for a stock (Le., higher stock price. O A decrease because the lowered risk of nuclear war means an investor will not need as much dividends to compensate them, which decreases the stock price O A increase because the lowered risk of nuclear war means potential investors will not need to be compensated for the higher rick with a higher return, so the expected retum will go down, leading to a higher stock price. D Question 20 3 pts If Starbucks has $15.9 million of common equity, $5.6 million of preferred stock, and $10.7 million of debt, what is their weight of debt? O 18% KEE C D Question 21 3 pts Peet's Coffee is considering a new project. It has a target capital structure of 45% debt, 45%% equity and 10%% preferred stock. Peet's has noncallable bonds outstanding, with a coupon rate of 8.5% (paid semiannually), that mature in 16 years with a face value of $1,000, and a market price of $905.45. The yield on the company's current bands is a good approximation of the yield on any new bonds they issue. The company can sell shares of preferred stock that pay an annual dividend of $6 at a price of $35.45. Peet's has retained earnings they will use to finance their project. They estimate their cost of equity using the CAPM approach. Their beta is 1.4, the risk-free rate is 2.2% and the expected market return is 7.8%%. If they have a tax rate of 35:0%%, what is the WACC for this project? O .7% O 8.2% 0 10.7% Q 13.7% D Question 22 3 pts Starbucks is interested in the following capital budgeting project that will require an initial investment of $550,000: Year Cash Flow 1 $125,000 2 $10,000 $510,000 Assuming the company has a WACC of 3.6%%, what is the NPV|[ Schoct ] VI IRR [Select ] - and MIRR [ Select ] ? Should the company accept, or reject, the project ( Select ]is the NPV [Select ) IRR $18.444 pany $19.597 370 868 $19.525\f\fthe project accept