12:114 Accounting and Finance Assig... Assume that you are the CFO of Microsoft Company and you were asked to estimate the cost of capital. Microsoft has 1500 bonds that now has 20 years to maturity and a 7.00% annual coupon. The bond currently sells for $925 and the company's tax rate is 30%. Moreover, Microsoft has 60,000 common stock (S10 par value) and the risk premium over its own debt cost is 5.00% and the the yield on a Treasury bond is 4%. The company recently decided that its target capital structure should have 35% debt, with the balance being common equity. Furthermore, the CEO identified two investments opportunities. Project A will cost $50,000 and Project B will cost $90,000. The CEO has decided that it will invest in one project but not both. The expected cash flow that will be generated by both project are listed below: S50.000 25,000 Project A Project B Initial capital expenditure $90.000 Cash year 1 30,000 2 40,000 3 14,000 4 26,000 20.000 15.000 10,000 10,000 10,000 In addition, the following table provides the close share price for Microsoft Corporation (MSFT) and NASDAQ. and the net income for MSFT: MSETNASDAG Net Incest Distan 2015 550 55.000 200.000 2.5130.000.00 2010 355 3.300 2.000 625133.000.00 2015 SO S6.000 52103025139.255.00 BOE SRO 54.750224920514621830 2015 566 57.00 5237.3246 S154 260.83 202657257853283.937 SIS 08.09 Required: Calculate the value of total risk and market risk for Microsoft Calculate the best estimate of the cost of debt and the cost of equity? In your opinion, what is the best estimate of the firm's WACC justify your answer? Calculate each one towing for both investments 12:11