A is an all-equity, multi-divisions company with an overall beta of 1.3 and 9.5% overall cost of equity. The return for a secured government bond is 3%. As medical division has an expected beta of 0.85. What is the expected cost of capital for As medical division?

		A. 6.25%
		B. 7.25%
		C. 5.75%
		D. 9.50%
		E. 8.50%

Indigo Manufacturing is considering adding a second production line to meet the market demand. In order to add the second production line, Indigo needs to purchase $1.2 million worth of new machinery and spend another $100,000 improvement on its current building. This new production line would produce 200,000 units, with expected sale price of $4.65 and a variable cost of $2.90 respectively for each unit. The required net working capital is $36,000. The fixed cost is $42,000 each year. By adding the second production line, the gross profit from the current production would be reduced by $29,000 each year. The salvage value for the machinery and building improvement would be $390,000 and 80,000 respectively. Indigo uses straight-line depreciation over the life of this project (5 years), its required rate of return is 15% and the tax rate is 34%. The total cash flow in year 5 would be closest to A. $748,885 B. $553,085 C. $582,070 D. $589,085 E. $618,740