1. Company A has three bonds outstanding whose information is displayed in the following table:

Bond issuer	Par Value	Price	Coupon rate %	Maturity
X	1000	$1038.9	10%	5 years
Y	1000	$1063.4	12%	4 years
Z	1000	1000	12%	4 years

All the bonds pay coupons annually. There are 100,000 units of bond X, 150,000 units of bond Y, and 150,000 units of bond Z. The companys common share price is $54/share and there are 200,000 shares of stock outstanding.

1) What are the implied yields to maturity of these three bonds?

2) Suppose that the corporate income tax rate is 19%. Calculate the overall after-tax cost of debt capital of company A.

3) The current market risk premium is 9.5%, the risk-free interest rate is 0.75% and beta of company As stock is 1.66. What is the companys cost of equity capital?

4) Given the cost of debt and cost of equity obtained in c.2) and c.3), calculate company As weighted average cost of capital. If a projects annual cash flow is 250,000 per year for 5 years and the initial cost to set up the project is $1million. Do you accept or reject the project?