1)	Company XYZ has the following capital structure as of 12/31/10:
			Debt			250,000
			Equity (Common Stock)			100,000
			Equity (Preferred Stock)			50,000
	The company expects to maintain this capital structure in the future and any future
	financing will be done as they have done in the past.
	In '11, they are considering the purchase of as asset which would cost $75,000. The '11 information
	includes the impact of this asset. All changes from '10 to '11 can be attributed to the benefits
	of this asset.
	The asset would be depreciated based on 10 year MACRS. The project will be evaluated
	over 3 years.
	The company's financial situation is as follows:
					12/31/2010		12/31/2011
			Revenue		1,000,000		1,094,000
			Expenses		880,000		935,000
	Revenue is expected to increase by 4% each and every year (after year 1) ; Expenses are
	expected to decrease by 2% each and every year (after year 1).
	Company is in the 40% tax bracket
	Select information relative to projected stock prices, dividends and bond rates are as follows:
	Stock prices:
	Common - projected'11			50.00		Preferred - projected'11		55.00
	Dividends
	Dividend - Common '07			0.75
	Dividend - Common '08			0.82
	Dividend - Common '09			0.87
	Dividend - Common '10			0.94		Dividend - Preferred '11-projected			2.85
	Bond - Market rates
	Market rate - '09			11.0%
	Market rate - '10			12.0%
	Market rate - '11			10.0%
	Anticipated administrative cost to issue stock are as follows:
	Common		5% of sales price
	Preferred		6% of sales price
	Based on NPV - at Cost of Capital plus 3% - should the asset be purchased?
	Based on NPV - If the company elects to finance strictly via bonds - should the purchase be made?
	What is the IRR of this project?
	What is the Payback?