Mini-Case Two Given the following information for Bajor Co.: Debt: Bajor's long-term debt capital consists of bonds with 6.250 percent coupon rate (semiannual coupon payments), 9 years time to maturity, and current price of 106.61 percent of its par value. Preferred stock: Bajor has not issued any preferred stocks. Common stock (equity): Bajor's equity capital consists of common stocks with the most recent annual dividend of $0.92 per share, and a current stock price of $14 per share. According to online data sources, Bajor's long-term dividend growth (e.g., for 5-Year average) g 4.5% per year. The "risk-free" Treasury bill return is 3.8%; the market expected return for the stock market on average is 12.3%; and Bajor's systematic risk (Beta) is 0.71. Taxes: The applicable federal-plus-state corporate tax rate for Bajor is 40 percent. Capital weight: Bajor's "Market Capitalization" amounts to $18.23 billion, and "Total Debt" amounts to $14.44 billion. You can use such data to estimate the capital weights for equity and debt, respectively (We and Wd). Time constraint: For any investment projects, Bajor are required by her investors to recover its initial cost within no more than 6 years. QI: What is Bajor's pretax cost of debt Rd, cost of equity Re, and WACC, respectively? (Hint: For the best estimate of cost of equity Re, you shall apply both CAPM and Dividend Growth Model and then average the two estimates.) Q2: There are three investment projects available to Bajor: (12 pts) Project A costs $12 million today and then provides after-tax net cash inflow of $2.50 million per year for the next 7 years. Project B costs $18 million today and then provides after-tax net cash inflow of $3.30 million per year for the next 8 years. Project C costs $30 million today and then provides after-tax net cash inflow of $4.25 million per year for the next 10 years. If Projects A, B & C are mutually exclusive, which project(s) should Bajor accept? (You must apply NPV, IRR and Payback rules) (8 pts) Q3: If the aforementioned Projects A, B & C are independent, which project(s) should Bajor accept? (You must apply NPV, IRR and Payback rules) (4 pts)