FINA Companys assets are $750 million, financed through bank loans, bonds, preferred stocks, and common stocks. Tax rate is 15 percent.

The amounts are as follows:

Bank loans: $ 100 million borrowed at 3%

Bonds: $280 million, paying 5% coupon with semi-annual payments, and maturity of 10 years. FINA sold its $1,000 par-value bonds for $1020 and had to incur $20 flotation cost per bond.

Preferred Stocks: $120 million, paying $15 dividends per share. FINA sold its preferred shares for $220 and had to incur $20/share flotation cost.

Common Stocks: $250 million, beta is 2, the risk-free rate is 6 percent, and the market rate is 10%.

1. Calculate the cost of capital. Please show your work precisely by indicating each component and weight.
2. Calculate the NPV, IRR, and payback period of a project with the cashflows below. Use the cost of capital you found in e when calculating the NPV and IRR. Should you accept or reject the project? Why?

   Cost of the project: $14,000

   Year	After tax Cash flow
   1	$4,000
   2	$4,000
   3	$4,000
   4	$4,000
   5	$4,000