Reference no: EM132803034

Questions -

Q1) Suppose a firm has 10.70 million shares of common stock outstanding at a price of $16.52 per share. The firm also has 246000.00 bonds outstanding with a current price of $1,194.00. The outstanding bonds have yield to maturity 6.24%. The firm's common stock beta is 1.785 and the corporate tax rate is 40.00%. The expected market return is 11.61% and the T-bill rate is 2.43%. Compute the following:

a) Weight of Equity of the firm

b) Weight of Debt of the firm

c) Cost of Equity of the firm

d) After Tax Cost of Debt of the firm

Q2) A firm has a WACC of 13.96% and is deciding between two mutually exclusive projects. Project A has an initial investment of $62.00. The additional cash flows for project A are: year 1 = $18.52, year 2 = $37.06, year 3 = $54.68. Project B has an initial investment of $70.53. The cash flows for project B are: year 1 = $57.66, year 2 = $49.97, year 3 = $26.34. Calculate the Following:

a) Payback Period for Project A:

b) Payback Period for Project B:

c) NPV for Project A:

d) NPV for Project B:

e) WACC for the Firm