1 Northwestern Lumber Products currently has 15,500 shares of stock outstanding. Patricia, the financial manager, is considering issuing $123,000 of debt at an interest rate of 6.2 percent. Given this, how many shares of stock will be outstanding once the debt is issued if the break-even level of EBIT between these two capital structure options is $61,000? Ignore taxes.

(A)12,884.13 shares

(B)12,658.10 shares

(C)14,692.43 shares

(D)13,562.25 shares

(E)11,624.78 shares

2.Alpha Industries is considering a project with an initial cost of $8.6 million. The project will produce cash inflows of $2.04 million per year for 6 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.79 percent and a cost of equity of 11.39 percent. The debtequity ratio is .66 and the tax rate is 35 percent. What is the net present value of the project?

(A) $758,352

(B) $656,266

(C) $729,185

(D) $625,015

(E) $506,837