Roberto Inc. is a manufacturing company. The company has always followed their ideal capital structure which the management insists is 40% debt and 60% equity capital. The company can issue bonds for 9% coupon rate with 22 years to maturity. The interest is paid semi-annually. The bonds can be issued with a price of $835.42 today. Robertos marginal tax rate is 40%. For cost of equity, the company uses the CAPM based on SML. The risk-free rate in the market is 8% and the market rate of return is 14%. The company has a beta of 1.1. Roberto is experiencing a highly abnormal growth rate of 30%. This growth rate is expected to continue for four years. After year four, the growth rate is expected to return to a normal 8% and remain constant afterwards for the foreseeable future. Roberto just paid a dividend of $1.15. Furthermore, Roberto is evaluating several projects to invest in. The top project that is being considered will cost $1,000,000 and promises to pay $500,000 in year one, $400,000 in year two, $300,000 in year three and $100,000 in year four. This project will cease to exist with no salvage value at end of year four. So, the cash flow would look like the following:

Year	CF ($ in 000s)
1	-1,000 (Initial Outlay)
2	500
3	400
4	300
5	100

What is Roberto's cost of debt before taxes? a) 11% b) 10% c) 12% d) 8%

What is Robertos after-tax cost of debt? a) 6.6% b) 7.2% c) 6% d) 4.8%

What is the companys cost of equity capital using the CAPM? a) 8% b) 9.6% c) 12.09% d) 14.6%

What is weighted average cost of capital (WACC) for Roberto Inc? a) 10.02% b) 11.40% c) 12.86% d) 14%

Using the information related to paid dividend, cost of equity and growth outlook for Roberto Inc., what should be the price for this supernormal growth stock today (P0)? a) $25.32 b) $33.42 c) $37.53 d) $39.21

Using the cash-flows related to the top project Roberto is considering and the WACC you previously calculated, what is the expected NPV for the project (in 000s)? a) $49.18 b) $78.82 c) $53.09 d) $109.45

Further evaluating the top project for Roberto, what is the anticipated IRR for the project? a) 13.02% b) 12.45% c) 14.49% d) 11.8%