A firm has the following capital structure:

$1.$ Bonds with a market value of $$2,000,000$

$2.$ Preferred Stock with a market value of $$700,000$

$3.$ Common stock, of which $100,000$ shares are outstanding. Presently, each common stock is selling at $$20$ per share

The preferred stock price per share is $$40$ and pays a $$2$

dividend. Common stock shares sell for $$20$ and pay a $$2$ dividend. Dividends for common stock are expected to grow by $2\%.$ The bond price is $$970,$ and the bond coupon rate is $6\mathrm{.}0\%.$ The bonds mature in $10$ years.

The firm$$s tax rate is $30\%.$ It has $$2,000,000$ in sales and expenses of $$1,175,000.$ The initial investment of $$5,000,000$ will be depreciated straight$-$line over ten years. The project is expected to last ten years.

$1.$ What is the firm$$s Weighted Average Cost of Capital $($WACC$)?$

$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_($Chapter $13)$

$2.$ What is the firm$$s Operating Cash Flow $($OCF$)?$

$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_($Chapter $9)$

$3.$ Using your computed WACC, compute the NPV$.($use the answer from question $1$ above$),$ and OCF $($use the answer from question $2$ above$)$

$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_($Chapter $8)$

$4.$ Based on your answer to question #$3,$ would you accept or reject the project? Explain why?

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