23.Mr. Guzman is the CFO at R Guzman Company.He is evaluating the financial feasibility of a new project, XYZ.Guzman is focusing in determining the discount rate that should apply to the project's operating cash flows.

The company research staff sends him the following information what could be useful for determining the cost of capital for the project:

1.Financing will be a mix of debt/ common stock

2.Expected book value of debt $ 10,000,000

3.Expected value of debt once it hits the market: $ 10,000,000

4.The bond coupon rate is 5%.As you can see the bond would be issued at par.

5.Expected book value of common stock is $25,000,000

6.The investment market thinks the equity market will trade the stock at a discount of 25% over book value.

7.Your staff could not generate the Beta of the project and there is not a publicly traded company whose operations are like R Guzman.

8.Guzman have no option but to forecast some relevant financial information of the project and the industry for the next 20.See financial photo attached (Data)