Hawkeye Co. is considering a project with an initial cost of $5 million. The project will produce cash inflows of $2 million a year for five years. The firm has a weighted average cost of capital of 12%. Assume that the project has an average risk level as the whole firm. What is the net present value of the project?

Group of answer choices

$3.62 million

$1.20 million

$4.88 million

$2.21 million

Crowell Inc. issued 20-year, 4 percent semiannual coupon bonds with par value of $1,000. The bond price is quoted at 110% of the par. What is its pre-tax cost of debt?

Group of answer choices

2.79 percent

1.66 percent

4.66 percent

3.31 percent