# solution

-Suppose a firm has 26.20 million shares of common stock outstanding at a price of \$36.78 per share. The firm also has 208000.00 bonds outstanding with a current price of \$1,074.00. The outstanding bonds have yield to maturity 7.49%. The firm’s common stock beta is 2.305 and the corporate tax rate is 40.00%. The expected market return is 10.94% and the T-bill rate is 5.60%. Compute the following:
a) Weight of Equity of the firm
b) Weight of Debt of the firm
c) Cost of Equity of the firm

A firm has a WACC of 9.33% and is deciding between two mutually exclusive projects. Project A has an initial investment of \$61.84. The additional cash flows for project A are: year 1 = \$19.55, year 2 = \$37.69, year 3 = \$52.57. Project B has an initial investment of \$71.35. The cash flows for project B are: year 1 = \$59.29, year 2 = \$49.99, year 3 = \$39.48. 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:
d) After Tax Cost of Debt of the firm
e) WACC for the Firm

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