Hi,

I need help with the following questions :

1. Jacks Construction Co. (JCC) has 80,000 bonds outstanding that are currently selling at par (face) value. Bonds with similar characteristics are currently yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. Treasury bill is currently yielding 4% and the market risk premium is 8%. The corporate tax rate is 35%.

Use this information to answer sections (a) - (e).

a. What is JCC's after-tax cost of debt?

b. What is JCC's cost of equity?

c. What is the proportion (weight) of debt in JCC's capital structure?

d. What is the proportion (weight) of equity in JCC's capital structure?

e. What is JCC's WACC?

2. Harry plans to start saving to provide for his retirement. Beginning one month from now, he will begin depositing a fixed amount each month into a retirement savings account that will earn 8.4% APR, compounded monthly. He will make these deposits for 35 years. Then, one month after making his final deposit, he will begin withdrawing $5,000 each month, and continue doing so for 20 years. The fund will continue to earn 8.4% APR compounded monthly.

Use this information to answer sections (a) and (b) below.

a. How much does Harry need to have saved 30-days prior to his first withdrawal in order to meet his retirement goal?

b. How much must Harry deposit into his account each month in order to achieve his retirement goal?

3. You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $400 and sales volume to be 1,000 units in year 1, 1,250 units in year 2, and 1,325 units in year 3. The project has a 3 year life. Variable costs amount to $225 per unit and fixed costs are $100,000 per year. The project requires an initial investment in equipment of $165,000 which is depreciated straight-line to zero over the 3 year project life. The actual market value of the equipment at the end of year 3 is $35,000. Initial net working capital investment is $75,000. The tax rate is 35% and the required return on the project is 10%.

Use this information to answer questions (a)-(c) below

a. What is the Total Initial Investment in this project?

b. What is the operating cash flow for the project in year 1?

c. What total amount of terminal valuein year 3?

d. Should you accept/reject the project is you use the NPV method?