A project will produce after-tax operating cash inflows of $3,200 a year for 5 years. The after-tax salvage value of the project is expected to be $2,500 in year 5. The projects initial cost is $9,500. What is the net present value of this project if the required rate of return is 16 percent?

A. $311.02

B. $2,168.02

C. $4,650.11

D. $9,188.98

E. $21,168.02

F. None of the options are correct.

Sols Sporting Goods is expanding and, as a result, expects additional operating cash flows of $26,000 a year for 4 years. This expansion requires $39,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires an additional $3,000 of net working capital throughout the life of the project; Sol expects to recover this amount at the end of the project. What is the net present value of this expansion project at a 16-percent required rate of return?

A. $18,477.29

B. $21,033.33

C. $28,288.70

D. $29,416.08

E. $32,409.57

F. None of the options are correct.

Key facts and assumptions concerning Costco Company, at December 31, 2011, appear below.

Facts and Assumptions:
Rate of return on Treasury Notes		3.28%
Interest rate on company debt		4.62%
Historical excess return on common stocks		6.10%
Company equity beta		0.80
Stock price	$	75.08
Number of shares outstanding (millions)		449.5
Book value of equity (millions)	$11,585
Book value of interest-bearing debt (millions)	$	2,524
Tax rate		35.00%

Use the above information to answer the following questions:

1. Estimate Costcos cost of equity capital.

2. Estimate Costcos weighted-average cost of capital.