Hello, I'm looking for some help on Question 4. I've already done some work on Question 2 and 3 which are needed in order to solve for Question 4. I'd like to understand the step by step and rationale behind the calculations. Can someone please help?!

Q 2:

Anna is a Vice President at the J Corporation. The company is considering investing in a new factory and Anna must decide whether it is a feasible project. In order to assess the viability of the project, Anna must first calculate the rate of return that equity holders expect from the company stock. The annual returns for J Corp and for a market index are given below. Currently the risk-free rate of return is 1.4% and the market risk premiums is 4.2%.,

a) What is the beta of J Corp.'s stock? (1 Mark)(Round your answer to two decimal places)

b) Using the CAPM model, what is the expected rate of return on J Corp. stock for the coming year?

Year	J Corp. Return (%)	Market Return (%)
1	-3.76	-4.90
2	7.07	8.64
3	10.11	12.44
4	10.11	12.44
5	-10.72	-13.60
6	12.83	15.84
7	13.47	16.64
8	10.61	13.06
9	6.48	7.90
10	7.87	9.64
11	-4.25	-5.51
12	-4.32	-5.60

Required rate of return= risk - free rate + Beta (Market Risk - premium)

J corp ave return = [(-3.76+7.07+10.11+10.11-10.72+12.83+13.47+10.61+6.48+7.87-4.25-4.32)/12}

4.625

4.63%

Calculate Stock Beta

4..76% + beta(4.63)

0..00376 + beta(0.0463)

0.04625-0.00376= Beta *0.0463

Beta *0.0463 .04249

Beta = 0.04249/0.0463

0.917

Q 3.

Refer to Question 2. Now that Anna has determined an appropriate rate of return for J Corp.'s stock, she must calculate the firm's Weighted Average Cost of Capital (WACC). There are currently 51.6 Million J Corp. common shares outstanding. Each share is currently priced at $7.70. As well, the firm has 6,000 bonds outstanding and each bond has a face value of $10,000, a yield to maturity of 3.64%

and a quoted price of $10,164.40. J Corp.'s tax rate is 30%. J Corp. has no preferred shares outstanding. What is J Corps WACC?

answer:

Outstanding 51,600,000

price at 1.1 /each

# outstanding bonds

Face (PAR) value = $10,000

Y/M .64%

Quoted price =$10,164.40

J Corp tax rate = 30%

Calculate Firm's Equity , debt value + weights

Total equity value [51,600,000*7.7] = 397,320,000

Total debt value [6000*10,164.40] = 60,986,400

total market value = 397,320,000/336,333,600] = 1.181

Debt weight = [60,986,400/336,333,600= = 0.181

Weighted average cost of capital = [1.181*0.04625] + [0.181*3.64(1-0.300]

(0.054621)+(0.181*3.64(0.7)]

(0.054621)+(0.181*2.548) = (0.054621)+(0.4612)

0.516

Question 4: HELP

Refer to Questions 2 and 3. The land for the factory will cost $290,000. The factory will cost $6,440,000 to build and construction will take two years with construction costs payable in equal installments at the start of each year.. The factory will operate for 20 years; however, at the end of the fifth, tenth, and fifteenth year of operation, refurbishment costs will be $440,000. At the end of its 20 year lifespan, the land can be resold for $310,000. There is a 70% probability that the factory's net operating cash flows will be $675,162 however, there is a 30% chance that net cash flows will only be $413,362. You may assume that net operating cash flows flow at the end of each year.

a) What are the Expected net operating cash flows per year?(Round your answer to 2 decimal places)

b) What is the Internal Rate of Return for the project?(Round your answer to one one-hundredth of a percent)

c) What is the Net Present Value of the project?Round your answer to 2 decimal places)

d) Should Anna recommend that the J Corporation build the factory?