Lilies Corp. provided information on their capital sources as followed.

• $52,500 in Debt: Their bonds have 30-year to maturity, 4% coupon and $1,000 par value. Current bond price is $980. Tax rate is 21%.
• $157,500 in Common stocks with current price of $140, most recent dividend of $3.50, and 9% growth rate.

56) What is their after-tax cost of debt?

A.) 4.12%

B.) 3.25%

C.) 5.19%

D.) 1.56%

How much is their cost of capital?

A.) 11.28%

B.) 15.97%

C.) 9.61%

D.) 2.86%

58.) Lillies Corp considers two independent projects A and B.

Project A has $2,000 NPV while Project B has $3,500 NPV.

What should Lillies Corp do?

A.) Accept only project a since it has a lower npv

B.) Accept both projects since they both have positive NPV

C.) Reject both projects

D.) Accept only project b since it has the higher npv