3. Simms Enterprises is attempting to evaluate the possibility of investing $85,000 in a machine having a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown below. Simms has a capital structure containing 40% debt, 20% preferred stock, and 40% common stock. The firms outstanding bonds have an $80 annual coupon, a par-value of $1,000, 10 years left to maturity, and a current price of $1,250. The firms annual preferred stock dividend is $4.00 and their preferred shares are currently selling for $20. The firms common stock has a beta of 1.3. The risk-free rate is 3% and the required return on the market is 9%. The firm faces a tax rate of 40%.

CF1 $18,000 CF2 $22,500 CF3 $27,000 CF4 $31,500 CF5 $36,000

a. What is the firms wacc? b. What is the projects payback? c. What is the projects discounted payback? d. What is the projects net present value? e. What is the internal rate of return on this investment? f. What is the projects modified internal rate of return? g. Should you accept this project? Why?