Question: Im having a problem in solving those two questions. can someone please explain it to me. Roger has a levered cost of equity of 0.23.

Im having a problem in solving those two questions. can someone please explain it to me.

  1. Roger has a levered cost of equity of 0.23. He is thinking of investing in a project with upfront costs of $7 million, which pays $1 million per year for the next 5 years. He is going to borrow $2 million to offset the startup costs at a rate of 0.08. His tax rate is 0.3. He will repay this loan at the end of the project. What is the NPV of this project, using the FTE method?

Please give your answer to the nearest dollar.

2.Waterdeep Adventure Travel has an unlevered cost of equity of 12.5%, and a cost of debt of 7.3%. Their tax rate is 32%, and they maintain a capital structure of 52% debt and the rest equity. They are considering giving cave exploration tours to their menu of adventure vacations. Buying the needed equipment would cost $66,393, and would bring in $22,196 one year from today, and $84,808 two years from today. What is the NPV of this project, using the WACC method, if they invest today?

Please give your answer to the nearest dollar.

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