Part I: WACC Use this information to answer questions 1-8 Suppose Intel wants to raise capital to start a new project to bring their manufacturing process back to the U.S. The pandemic has shown them that they cannot rely on a foreign supplier. The CEO asks you to calculate their weighted average cost of capital. He gives you these facts. Tax rate = 12.5%. Intel has the following bonds all have a face value of $1,000 5-year, 4.6% coupon, semiannual payment non-callable bonds with a price of $1,016. 20 year, 6.2% coupon semiannual payment callable bonds with a price of $1,035. And 20 year, 5.9 % coupon semiannual payment non-callable bonds with a price of $1,018. New bonds will be privately placed with no flotation cost. Intel has preferred stock that sells for $125.00. It pays an annual dividend of $4.67. Their common stock sells for $59.26. The annual dividend is $1.32 and the dividend growth rate is 2.4% a year. The stock has a Beta of .80. The risk free rate is 1% and the market risk premium is 4.6%. Intel considers their bond-Yield Risk Premium to be 3%. Intel currently has 30% of their capital coming from debt, 20% from preferred stock and 50% from common equity, however their target is to have 38% from debt, 18% from preferred stock and 44% from common equity. Part II: Capital Budgeting Use this information to answer questions 8 - 15 Intel is contemplating a new project where they will bring their computer chip manufacturing business back to the United States. They are estimating that they will invest $470,000 initially then will have positive cash flows over the next four years of: Year 1: $35,000 Year 2: $115,000 Year 3: $140,000 Year 4: $220,000 Regardless of your answer in the previous question use a WACC of 7.5%. (This is NOT the answer you should have gotten in part 1.) QUESTION 10 We can use the IRR method to evaluate this project because it has normal cash flows. O True False QUESTION 11 Based on the information in Part II of the Intel project, what is the IRR of the project? A. 6.5% B.5.42% C. 3.02% D.2.71% QUESTION 12 Based on this IRR Intel SHOULD move forward with this project. True False