Grand Co. is planning on establish a project of new line product for 4 years that can help to enhance the income of the company in the next few years. The project is estimated required approximately $3,000,000 for the initial investment. The total cash outflows each year are estimated $1,000,000; $900,000; $700,000 for the year 1, 2 and 3. The total cash inflows are forecasted $500,000; $4,500,000; $6,600,000; and $4,000,000, respectively, during the period of the project.

In order to implement the project, the company used the following capital structure:

1. Issuing bonds: 5,000 coupon bond, with 10% of coupon rate that paying annually for 5

years, the YTM of the bonds is estimated with 9%.

2. Issuing Preferred stock: 2,000 preferred stock with 20% of preferred with par value of

$150. Required rate of preferred is supposed 12%.

3. Issuing Common stock: 10,000 common stocks. The company plans to pay $5 dividend

next year for each stock. And the growth rate of dividend is constant with 9% each year.

Company data: Tax is 30%; beta of the company is 1.5

Market data: Average market return is 13%; Treasury bill rate is 5%.

Requirement:

a. Calculate the price of all companys securities. Assuming that the selling prices of the the price investors are willing to pay.

b. Calculate the weighted average cost of capital of the company.

c. How do you think about the feasibility of the project?