Complete problem: Cost of Equity-CAP

XYZ, Inc. has a beta of 0.8. The yield on a 3-month T-bill is 4%, and the yield on a 10-year T-bond is 6%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 15%.

What is the estimated cost of common equity using the CAPM? Show your work.

1. Complete problems: NPV, IRR, MIRR, Profitability Index, Payback, Discounted Payback

A project has an initial cost of $60,000, expected net cash inflows of $10,000 per year for 8 years, and a cost of capital of 12%. Show your work.

1. What is the projects NPV? (Hint: Begin by constructing a timeline.)
2. What is the projects IRR?
3. What is the projects MIRR?
4. What is the projects PI?
5. What is the projects payback period?
6. What is the projects discounted payback period?
7. Your division is considering two investment projects, each of which requires an up-front expenditure of 20 million. You estimate the investment will produce the following net cash flows:

Year	Project A	Project B
1	$5,000,000	$20,000,000
2	10,000,000	10,000,000
3	20,000,000	6,000,000

1. What are the two projects net present values, assuming the cost of capital is 5%? 10%? 15%?
2. What are the two projects IRRs at the same cost of capital?

Show your work.