3. The following five parts are all based on the status quo of company BW. (1) Company BW has issued 8,000 corporate bonds with a maturity value of $1,000 and a coupon rate of 7%. Coupon payments are made every 6 months and those bonds will mature in a year from today. Current market price of those bonds is $976.86. Marginal corporate income tax rate is 34%, find the annual after-tax cost of debt. [7 points]

(2) Company BW has issued 35,000 preferred stocks. The par value is $100, dividend rate is 7.5%, and dividend is paid quarterly. Market price is $82 a share. Find the annual cost of preferred stock. [5 points]

(3) Company BW has 100,000 shares outstanding and the market price is $25 per share. People believe this company is 1.8 times as risky as the stock market. Current T-bill rate is 2.5% and expected annual market risk premium is 9.1%. What is BWs annual cost of equity? [5 points]

(4) Find the overall (annual) cost of capital for BW (WACC), assuming it has financed only through bonds, preferred stocks and common stocks. [10 points]

(5) Company BW has the following two investment opportunities (A and B). Which project is better, according to MIRR? [10 points] Which project is better, according to Discounted Payback period? [10 points]