Project Evaluation

Kolby's Korndogs is looking at a new sausage sytem with an installed cost of $655.000. This cost will be depreciated straight-line to zero over the project's five-year lie, at the end of which the sausage system can be scrapped for $85.000. The sausage system will save the firm $183.000 per year in pre tax operating cost, and the system requires an initial investment in net working capital of $35.000. If the tax rate is 34 percent and the discount rate is 8 percent, what is the NPV of this project?

Calculating the WACC

You are given the following information concerning Parrothead Enterprised:

Debt:

13000 6.2 percent coupon bonds outstanding, with 15 years to maturity and a quoted price of 107. these bonds pay interest semiannually.

Common stock:

345000 shares of common stock selling for $73.50 per share, the stock has a beta of .90 and will pay a dividend of $3.35 next year. the dividend is expected to grow by 5 percent per year indefinitely.

Preferred stock:

10000 shares of 4.1 percent preferred stock selling at $86 per share.

Market:

12 percent expected return, risk-free rate of 3.5 percent, and a 35 percent tax rate.

please detail explanation and answer both question.