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Doremi Corp is considering a project that has the same risk as the company and has the following cash flow data. Year Cash flows 0
Doremi Corp is considering a project that has the same risk as the company and has the following cash flow data. Year Cash flows 0 -$1,200 1 $520 2 $490 3 $580 The company has target capital structure of 35% debt, 10% preferred stock, and 55% common equity. Several years ago the company sold a $1,000 par value, noncallable bond that now has 15 years to maturity and a 5% coupon rate that is paid annually. The bond currently sells for $900. The yield on the preferred stock is 4.00%, the cost of retained earnings is 9%, and the tax rate is 35%. The firm will not be issuing any new stock. (a) What is Projects WACC? (6 marks) (b) What is the Project's NPV? (4 marks)
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