Problem 12-1 The Glendale Corp. is considering a real estate development project that will cost $5 million to undertake and is expected to produce annual inflows between $1 million and $4 million for two years. Management feels that if the project turns out really well the inflows will be $3 million in the first year and $4 million in the second. If things go very poorly, on the other hand, inflows of $1 million followed by $2.5 million are more likely. Develop a range of NPVs for the project if Glendale's cost of capital is 6%. Round the answers to the nearest dollar. NPV for the good scenario. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000, not 1.2. $ ____ NPV for the unfavorable scenario. Use a minus sign to indicate a negative NPV. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000, not 1.2. $

_________________________________________

Problem 12-2

The Glendale Corp. is considering a real estate development project that will cost $5 million to undertake and is expected to produce annual inflows between $1 million and $4 million for two years. Management feels that if the project turns out really well the inflows will be $3 million in the first year and $4 million in the second. If things go very poorly, on the other hand, inflows of $1 million followed by $2.5 million are more likely. Glendale's cost of capital is 10%. If Glendale's management attaches a probability of .7 to the better outcome, what is the project's most likely (expected) NPV? Round the answer to the nearest dollar. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000, not 1.2. $ ____

____________________________________________________

The Aztec Corporation has the following capital components and costs. Calculate Aztec's WACC. Round the answer to two decimal places of percentage. Do not round your intermediate calculations.

Component		Value		Cost
Debt		$23625		12.0%
Preferred Stock		4350		15.0
Common Equity		52275		20.5

____%

____________________________________________

Asbury Corp. issued 30-year bonds 11 years ago with a coupon rate of 9.5%. Those bonds are now selling to yield 7%. The firm also issued some 20-year bonds 2 years ago with an 8.9% coupon rate. The two bond issues are rated equally by Standard and Poors and Moody's. Asbury's marginal tax rate is 34%. Assume face value of the bonds is $1,000. Assume that the coupon payments are semi-annual.

1. What is Asbury's after-tax cost of debt? Round the answer to two decimal places. _____%
2. What is the current selling price of the 20-year bonds? Round the answer to the nearest cent. $ ______