Book Value of Debt	$2,500,000,000
Market Value of Debt	$2,250,000,000
Book Value of Equity	$3,500,000,000
Market Value of Equity	$4,000,000,000
Beta for Behnke	1.15
Risk free rate	3%
Expected return on the market	9%
Flotation cost for equity	5%
Tax rate	25%
Bond information	Coupon rate = 4%, maturity = 15 years, maturity value =$1,000 and the current price is $985.63. Assume interest is paid semiannually. Flotation cost for debt is 2%

1. Compute the cost of debt for Behnke. Be sure to adjust for flotation costs.
2. Compute the cost of equity for Behnke. Be sure to adjust for flotation costs.
3. Compute the cost of capital for Behnke.

Behnke Golf has decided to sell a new line of golf clubs. The clubs will sell for $825 per set and have a variable cost of 77% of revenues per set. The company has spent $250,000 for a marketing study that determined the company will sell 90,000 sets per year for seven years. The company also plans to offer a line of golf balls, which are expected to sell for $45/dozen and have a variable cost of $15/dozen. They expect to sell 100,000 dozen balls. The fixed costs each year will be $15,200,000. The company has also spent $1,000,000 on research and development for the new clubs. The plant and equipment required will cost $25,500,000 and will be depreciated using the MACRS seven-year schedule. The equipment will be sold for 150% of its book value in year 7. The new clubs will also require an increase in net working capital of $1,800,000 that will be returned at the end of the project. The tax rate is 25 percent. Information for computing the cost of capital is given in the previous problems.

4. Construct the proforma income statement for this project.
5. Calculate the NPV of the project.
6. Compute the IRR of the project.
7. Compute the profitability of the project.

Please show in EXCEL