20. A firm has $1 million market value, and it sells preferred stock with a par value of $100. If the annual dividend on the preferred stock is 5% and the preferred stock trades at $91, what is the cost of preferred stock capital? a. 4.67% b. 4.95% c. 5.22% d. 5.49% 21. A farmer sows a certain crop. It costs $240,000 to buy the seed, prepare the ground, and sow the crop. In one year's time it will cost $93,200 to harvest the crop. If the crop will be worth $350,000, and the interest rate is 7%, what is the net present value (NPV) of this investment 2. $240,000 b. $87,103 c. SO d. $567,103 22. An auto-parts company is deciding whether to sponsor a racing team for a cost of $1 million. The sponsorship would last for three years and is expected to increase cash flows by $570,000 per year. If the discount rate is 6.9%, what will be the change in the value of the company if it chooses to go ahead with the sponsorship? 2. S498,597 b. $747,896 c. $797,756 d. $847,615