4) Alpha Beta Co. (ABC) is trying to determine the initial outlay of a project. ABC estimates that the project will generate $25,000 net cash flow at the end of each year for 5 years. The projects cost of capital is 11%, and the project has a 10% internal rate of return.

a) What should be the possible initial outlay amounts?

b) what is the payback period and discounted payback period respectively?

5) a) ABC Incs stock has a 25% chance of producing a 10% return, a 50% chance of producing a 15% return, and a 25% chance of producing a -2% return.

a) What is the firms expected rate of return?

b) Calculate the required rate of return for ABCs INC., assuming that investors expect to pay a 3.0% rate of inflation in the future, the nominal risk-free rate is 4.5%, expected market return is 11% and the firm has a beta of 1.50. (Hint: need to find out the market risk premium first)

6)Fresh Inc.s target capital structure is 60% debt and 40% common stock. The companys outstanding annual coupon bonds have a yield-to-maturity of 10%. The companys common stock sells $20 per share. D1= $2.00 and g=0.04. The tax rate is 30%.

a) what is the companys cost of equity?

b) what is the companys WACC?