From the above we need to find the second part of the math ...

1) we first calculate each source cost Cost of preference share = annual dividend/(price - flotation cost) = 6/(55 - 1.9) * 100 11.30% Cost of debt face value 1000 Coupon (0.12 * 1000) 120.00 period 20 years price 900 - (0.025 * 1000) 875.00 we use the excel RATE formula to calculate the YTM RATE(20,120,-875, 1000) = 13.87% Cost of equity expected dividend/(price - flotation cost) + growth rate so there are 7 year between these two period growth rate = (end value/beginning value)^(1/time period) - 1 ((5.07/2.45)^(1/7) - 1) * 100 10.95% 5.07/(49 - 2.5) +0.1095 21.85% the weighted average cost of capital weight of debt * cost of debt * (1 - tax rate) + weight of preference share * cost of preference share + weight of equity * cost of equity) 0.5 * 13.87% *(1-0.35) + 0.1 * 11.3% +0.4 * 21.85% 14.38% Now Johnlewis is planning to analyze two projects.Proiect Alpha and Beta the following expected net cash flows: Alpha Beta Year 0 1 2 3 4 5 Cash Flow $600,000 250,000 300,000 350,000 250,000 100,000 Cash Flow $600,000 450,000 400,000 300,000 200,000 Assume you are a finance manager of John Lewis. Which project you should Choose based on NPV? Would your decision change if payback method was used? Or Discounted Pay back period? Which method you think is the best to find out the solution and why? Why you are not choosing the other two methods? Total 15