Exercise 1 :

Barton Industries expects next year's annual dividend, D1, to be $1.80 and it expects dividends to grow at a constant rate gL = 4.9%. The firm's current common stock price, P0, is $22.50. If it needs to issue new common stock, the firm will encounter a 5.7% flotation cost, F. Assume that the cost of equity calculated without the flotation adjustment is 12.9% and the cost of old common equity is 12.6%.

Question 1 : What is the flotation cost adjustment that must be added to its cost of retained earnings? Do not round intermediate calculations. Round your answer to two decimal places.

Question 2 : What is the cost of new common equity considering the estimate made from the three estimation methodologies? Do not round intermediate calculations. Round your answer to two decimal places.

Exercise 2 :

Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 9%.

	0	1	2	3	4
Project A	-1,000	650	360	250	300
Project B	-1,000	250	295	400	750

Question 1 : What is Project A's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

Question 2 : What is Project B's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.