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Given the following information for Huntington Power Co. Assume the companys tax rate is 35%.

Debt: 4,000 bonds outstanding, 7% coupon, $1000 par value, 20 years to maturity, selling for 103% of par; the bonds make semiannual payments

Common stock: 90,000 shares outstanding, selling for $57 per share; the beta is 1.10.

Preferred stock: 13,000 shares of preferred stock outstanding, selling for $104 per share, $6 annual dividend.

Market: 8% market risk premium and 6% risk-free rate

15. What is Huntington Powers cost of debt (before tax)?

a. 3.36 percent

b. 6.00 percent

c. 6.72 percent

d. 7.00 percent

e. 8.00 percent

16. What is Huntington Powers cost of common stock?

a. 6.00 percent

b. 8.20 percent

c. 8.80 percent

d. 14.00 percent

e. 14.80 percent

17. What is Huntington Powers WACC?

a. 9.60 percent

b. 10.51 percent

c. 11.81 percent

d. 12.20 percent

e. 14.80 percent

18. Huntington Power is considering a project that will result in initial after-tax cash savings of $3.5 million at the end of the first year for 7 years. The cost-saving proposal is somewhat riskier then the usual project the firm undertakes; management uses the subjective approach and applied an adjustment factor of +2% to the cost of capital for such risky project. What is the NPV of the cost-saving project?

a. 3,000,000.00

b. 3,500,000.00

c. 3,136,200.72

d. 16,177,807.25

e. 17,266,214.14