18. You were hired as a consultant, to Giambono Company, whose target capital structure is 40% debt, 20% preferred, and 48% common equity. The after-tax cost of debt is 6.0bs, the cost of preferred is 37.50%, and the cost of retained earnings is 10.758. The firm will not be issuing any new stock. What is its WACC? 5 a. 8.208 oftarle to dos b. 9.268 c. 9.348 d. 9.748 e. 9.868 19. Several years ago the Jakob Company sold a $1,000 par value, noncallable bond that now has 15 years to maturity and a 6.00% annual coupon that is paid semiannually. The bond currently sells for $825, and the company's tax rate is 40%. What is the component cost of debt for use in the WACC calculation? a. 4.22% b. 4.46% c. 4.658 d. 4.99% e. 5.90% 35. DU 1401 - 210 44900 Carlyle Inc. is considering two mutually exclusive projects. Both require an initial investment of $15,000 at t -0. Proje expected life of 2 years with after-tax cash inflows of $6,800 and $12,000 at the end of Years 1 and 2, respectively. Project L has an expected life of 4 years with after-tax cash inflows of $5,200 at the end of each of the next 4 years. Each project has a WACC of 10.00%, and neither can be repeated. The controller prefers Projects, but the CFO prefers Project L. How much value will the firm gain or lose if Project Lis selected over Project s, i.e., what is the value of NPV. - NPVS? a. $226.74 b. $285.93 c. $384.13 d. $412.80 e. $542.62 40. Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year 11.fe, and would have a zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Risk-adjusted WACC Net investment cost (depreciable basis) Straight-line deprec. rate Sales revenues, each year Operating costs (excl. deprec.), each year Tax rate 10.0% $65,000 33.3333% $63,500 - $28,000. 40.0% a. $9,523 b. $9,892 c. $10,441 d. $12,359 e. $15, 325