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3) [1 point ] You want to estimate the cost of a firm's hybrid security . The security was issued three years ago at $50 / security . The price is currently $53 / security . It pays a semiannual dividend of $3. 00 / security . The company has the one-time option to pay a super dividend of $55 / security in 5 years , which would cause the securities to expire ( essentially , a buyback option ) . Your research indicates that the company will exercise this option with a probability of 40% . What is the annualized cost of this firm's hybrid security capital ? A ) 11. 32% B ) 11. 89% C ) 11.55%5 ) [2 points ] You estimate that the free cash flows of a firm will be $10million , $15 million , $20 million and $2 2 million over the next four years . You estimate ( properly ) that the cash flows will grow at 5% thereafter ( and you are comfortable with the steady-state year free cash flow ) . You have calculated the cost of equity capital = 15.5% and the pre-tax cost of debt capital = 7% . The average tax rate is 20% , and the marginal tax rate is 40% . The firm is currently operating with a D / E ratio of 1. 0 , and the target D / Eratio is 0 . 60 . Calculate the value of the firm . A ) $290.68 million B ) $386 . 92 million C ) $ 264. 86 million 6 ) [2 points ] You are evaluating a software package that will streamline the collection of your accounts receivable . The software will cost $3 million , and you plan to depreciate this cost over a 3 - year , straight - line horizon . You do not anticipate additional capital spending , and because the software is unique to your firm , it will not be sold . The firm's marginal tax rate is 30% , and its WACC is 20% . Further , the effects of this software package are expected to continue into perpetuity , and you project a terminal period revenue growth of 5% . Assume that all other operating expenses , net working capital accounts ( except for A / R ) and capex remain the same . Revenue and Days Receivables Outstanding projections are shown below . As seen , the software should allow your firm to collect its receivables sooner than it would under the baseline projections . What is the NPV of this project ? 2014 A 2015 E 2016 E 2017 E 2018 E 2019 E Revenue 75 150 200 250 260 273 Days Receivables Outstanding 09 60 60 60 09 Base Case 60 With Software Package 60 50 45 40 40 40 A ) $10 . 24 million B ) $12.09 million C ) $9.64 million