b) XYZ Company is considering an investment project, which involves a net cash outlay of LKR 500,000 and that it, is expected to generate an annual net cash inflow of LKR. 150,000 for 7 years. The projects target debt ratio is 40 percent. To finance the project, the firm will issue 7 years 15% debentures of LKR 200,000 at par and new common share of LKR 300,000. The issue price of a common share is LKR 20 and the expected dividend per share next year is LKR 1.80. Dividends are expected to grow at a rate of 7 per cent forever. Assume that a corporate tax rate is 50 percent. What is the NPV of the project. (10 Marks) Why there is a cost to using retained earnings? (02 Marks) What factors determine the required rate of return for any company? (02 Marks) c) d)