Your firm is replacing a manually-operated machine with a fully automated machine. The old machine was purchased 5 years ago, had an original depreciable value of SI40.000, and is depreciable using simplified straight-line for 10 years. The old machine has maintenance and defects costs totaling $9, 000 per year. The current salvage value of the old machine is $12.000. The new machine costs $80, 000 with shipping costs of $2, 000. The new machine would be depreciated over 5 years using simplified straight line, and would have no salvage value after the fifth year. The new machine would have maintenance and detects costs totaling $4, 000 per year. The marginal tax rate is 35%. What is the annual cash flow for years 1 through 5 (not including the terminal cash flow) if the project is undertaken? $5, 000 $1, 690 $2, 600 $3, 250 $4, 090 McCall Corporation has a capital structure consisting of 55 percent common equity. 30 percent debt, and 15 percent preferred stock. Any debt issues would have a pre-tax cost of 9 5%. Preferred stock can be issued for a cost of 11.5% Common equity can be issued, but flotation costs of $4 25 per share of common stock would be paid McCall common stock is currently selling in the market at $65 per share McCall recently paid a dividend of $4 per share and company earnings and dividends are expected to grow at an annual rate of 8% indefinitely McCall has a marginal tax rate of 35% and the firm wants to keep its current capital structure. If the firm needs to raise additional equity, what will be the firm's cost of capital? 11.60% 11.34% 11.89% 11.64% 12.44%