In financing its $200M project, Fenix Corp (i) issues $34M par value of preferred stocks, (ii) $58M par value of long-term debt, and (iii) finances the remaining portion of the project with common stocks that have a discount rate of 15%. Its 20-year 8.8% coupon bonds, which pay semi-annual coupons, are priced at 98% of the par value. Its preferred stocks have a 6.9% annual dividend rate on a par value of $100 and are priced at $97 per share.

(a) Compute the current yield and the capital gain yield of the discount/par/premium (circle your choice) bond issued by Fenix Corp. Based on the information about the bond, state TWO different properties that support your choice of the bond type.

(b) Compute the weighted average cost of capital for Fenix Corp. that has a marginal corporate tax rate of 21%.

(c) The flotation costs for raising new debt capital, preferred stock capital and equity capital are, respectively, 3.5%, 7.5% and 14%. Besides, the $200M project generates an adjusted NPV of $15.0M. Assume that one-third of common equity capital is financed with retained earnings, compute the weighted average flotation cost and the adjusted NPV of this project after taking into account of flotation costs. Precisely explain how the flotation cost adjustment impacts your recommendation on the project.