63. John's car inc. has the following capital structure:

65% common stock

5% preferred stock

30% long-term debt

The risk free premium of Johns car inc. vs 90-day T-Bills is 12%. The risk-free rate equals 5%.

The yield to maturity of 20 year IS Govt. bonds is 6.0%.Johns credit rating is A+ the credit spread for A+ is 1.5%.

John car inc. effective tax rate is 35%. the company recently issued preffered stock that pays a 10% divident. Issuance costs were 5% of par.

A) What is Johns cost of equity ?

B)What is Johns pre tax and after tax cost of debt ?

c) What is Johns cost of preffered stock net of issuance costs?

D) What is Johns car inc WACC?

E)Johns car inc is considering a project that has an IRR = 15% . If Johns finances the investment with equity, should it proceed with the project ?Why or why not?

F) If Johns car inc finances the project (IRR=15%) using all three sources of financing (debt , equity ,and preffered stock) in the proportions stated above, should it proceed with the project? Why or why not?