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Part 1 | Attempt 1/2 for 10 pts. If the annual interest rate is 12%, what is the quarterly interest rate? 4+ decimalsYou are valuing a project with the following estimates for year 2: Taxable Income (EBIT) 45 Tax Rate 35% Allocated R\\&D costs* 10 Depreciation 10 Year 1 Net Working Capital 20 Year 2 Net Working Capital 15 *Reflects costs that have already been incurred, assigned to year 2 of the project. Part 1 Attempt 1/2 for 10 pts. What is the total Free Cash Flow in year 2? 1+ decimalsCompanyA and Company B have the same basic business model and the same asset composition. CompanyA is nanced with 50% debt and Company B has no debt. For simplicity, assume that there are no taxes. \\__I f Part 1 I- Attempt1z'1for10pts. What is true about the cost of equity for each company? O CompanyA has a higher cost of equity than Company B O CompanyA and Company B have the same cost of equity 0 Company B has a higher cost of equity than Company A A zero-coupon corporate bond has a face value of $1000 and matures in 1 year. The bond is risky, and with a 9% probability, the company will default and the bondholders will only recieve $250. The bond currently trades for a price of 879.72 Part 1 | Attempt 1/2 for 10 pts. What is the promised yield on the bond? 3+ decimals Submit Part 2 | Attempt 1/2 for 10 pts. What is the expected return on the bond?You are asked to use the CAPM to calcuiate the cost of equity for a company for use in project valuation. Assume that the project is roughly the same risk and duration as the company's existing projects, building construction projects making revenues from long-term lease contracts over several decades. The annualized yield on 30-day treasury bills: 1.5% The annualized yield on 30-year treasury bonds: 4.2% The average market return from 1927-today: 11.6% The forward looking market risk premium: 4% Sample covariance of company stock with 8&P500: 0.4 Sample variance of S&P500: 0.5 |"' Attem t 1l2 for 10 ts. Part 1 p p What is the cost of equity for the project according to the CAPM? (Note that you don't necessarily need to use all of the data presented.) t3+ decimals Why is the CAPM useful? Check all that apply: O The calculation of Beta provides qualitative evidence on the cyclicality of the firm's cashflows and its financial risk O The CAPM accounts for the risk that projected cash-flows are potentially too high. O The CAPM provides an accurate method for determining the cost of equity O Carefully choosing the risk free treasury means the cost of capital will reflect the duration of the project.Debt is treated diferently from equity in the WACC equation, multiplying r1) by (1 To) \\._g f \"\\ Part 1 II"I Attempt1l'1for10 pts. Why is debt treated differently from equity? 0 Interest expense reduces taxable income, but dividend payouts do not 0 Debt is more risky than equity and must be adjusted accordingly 0 Interest income is deductible on investors personal taxes, but dividend income is not 0 Debt is less risky than equity and must be adjusted accordingly 0 Dividend income is deductible on investors personal taxes, but interest income is not C) Dividend payouts reduces taxable income, but dividend payouts do not