Problem 13:

Problem 13 Intro International Shipping Lines is a U.S. based operator of container ships. The company is considering opening a new shipping hub in Greece: . The hub will cost $50 million to build, and will generate free cash flows of (10 million in each of the next four years. At the end of year 4, it can be sold for 630 million (after taxes). . The current exchange rate is $1.07 per euro. The company expects the exchange rate to stay constant. To evaluate the proposal, the company needs to calculate its weighted average cost of capital. It has collected the following information: . The company would have to pay an interest rate of 5% on new bonds. . The company uses the CAPM to find the cost of equity. Its beta is 0.6, the yield on Treasury bonds is 1% and the expected return on the market (S&P 500) is 5%. . The company wants to maintain is current capital structure. The value of bonds is $56 million and the market value of equity is $159 million. . The U.S. tax rate is 21%.Part 1 7 8 | Attempt 1/10 for 10 pts. What is the cost of equity? 4+ decimals Submit Part 2 7 8 Attempt 1/10 for 10 pts. What is the company's weighted average cost of capital? 4+ decimals Submit Part 3 7 8 | Attempt 1/10 for 10 pts. What is the NPV of this project (in $ million)? Hint: use the weighted average cost of capital exactly as calculated in the previous part. 1+ decimals Submit