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1. The capital structure ofJohn Lewis is below Source Target market proportions Long-term debt 50% Preferred stock 10 Common stock equity 40 PREFERRED STOCK: The firm has determined it can issue preferred stock at $75 per share par value. The stock will pay an 54.5 annual dividend. The cost of issuing and selling the stock is 52.5 per share. DEBT: The firm can sell a 17 year, $1,000 par value, 12 percent bond for $950. A flotation cost of 2.5 percent of the face value. COMMON STOCK: The dividend expected to be paid at the end of the coming year is $5.07 and selling price is 550. Its dividend payments have been growing at a constant rate for the last 6 years. Six years ago, the dividend was 52315. the cost of issuing the stock was 52.9 the firm's marginal tax rate is 35 percent. What is the cost of capital of the firm? If you are a finance manager of the company and your task is to reduce the cost of capital .In this situation how you can minimize the cost. Explain * 2. Projects X and Y have the following expecteo . cash flows: [7) Project X Project Y Year Cash Flow Cash Flow 0 -$600,000 -$600,000 1 350,000 350,000 2 350,000 350,000 3 250,000 250,000 4 250,000 200,000 5 150,000 Both the projects are of the same company, cosmo Pharma. The most recently paid dividend was 52.5 and it is growing at 5% for the infinite period of time. Moreover, the stock is selling for $45. Assume you are a finance manager ofthe company. Which project you should Choose based on NPV? Would your decision change if payback method was used? Or Discounted Pay back peod? Which method you think is the best to nd out the solution and why? Why you are not choosing the other two methods? T