Rogers Communications is considering a massive project with hopes of renovating the Rogers Centre, home to the Toronto Blue Jays. Estimated Renovation costs are approximated at $$250$ million. It has been estimated that the renovations and additions would lead to an increase in revenue of $$30$ million per year in the first five years of completion $($Years $1-5),$ $$35$ million per year in years $610,$ and $$40$ million per year for the next $3$ years $($Years $1113).$ After which there would be no further revenue benefit from the renovation. You have been hired to consult management on the viability of such a project. Using the following information for Rogers Communications determine whether they should undertake this project.

Rogers Communications currently has the following Capital Information:

Total Outstanding Bonds $=100,000$ bonds with a $$1,000$ par value and $6\%$ coupon rate. The bonds have $15$ years remaining until maturity. They pay interest semi$-$annually. Current yields on bonds $($current yields to maturity$)$ are $8\%$ because of rising interest rates over the last couple of years. In Canada the Corporate Tax Rate is $26\mathrm{.}5\%$

Rogers issued Preferred Stock when the Rogers Centre was originally built. There are $1\mathrm{.}5$ million shares of $$100$ par value stock with an $7\%$ dividend. Right now, the stock is selling for $$118/$share$.$ The option exists to issue new Preferred Stock. The Investment Bank they will use to underwrite the offering charges $10\%.$

Common Stock for the company just paid a dividend of $$3\mathrm{.}50/$share$.$ The dividend has been increasing each year by $2\%.$ There are $8$ million shares of Common Stock outstanding with a current price of $$70.$ Rogers would prefer to avoid issuing new Common Stock. However, if they do a secondary offering of stock they will be charged $15\%$ by the underwriter.

Rogers Communications is a telecommunications company. They have a Beta of $0\mathrm{.}33.$ The Expected Return on the Market during the last several years has averaged $13\mathrm{.}89\%$ annually with a Market Risk Premium of $9\mathrm{.}82\%.$

Management is hesitant to take on a big project like this because they worry that they will not be paid back within their desired $5-$year time range. They are looking to you for guidance on what they should do$.$ The CEO of the company was talking to his grandson that runs a hedge fund. His grandson told him that if the Return is less than $10\%$ then it is a bad investment and Rogers Communication would be better off by giving him the $$250$ million to invest for them. Using the best practices of Capital Budgeting and Cost of Capital Techniques complete the following questions. These can be completed here but your responses must be submitted in the Moodle link in order to be graded.

What is the current cost of the Common Equity if internally generated? $($Use CAPM$)(2$ decimal places, i$.$e$.10\mathrm{.}25$ No percentage sign needed$)$

What is the current cost of the Common Equity if internally generated? $($Use DCF$)(2$ decimal places, i$.$e$.10\mathrm{.}25$ No percentage sign needed$)$

What is the current average cost of internally generated Common Equity? $($Average of CAPM and DCF$)(2$ decimal places, i$.$e$.10\mathrm{.}25$ No percentage sign needed$)$

What is the current cost of Common Stock if externally generated? $(2$ decimal places, i$.$e$.10\mathrm{.}25$ No percentage sign needed$)$

Calculate the WACC $($use the externally generated cost of Common Stock$)(2$ decimal places, i$.$e$.10\mathrm{.}25$ No percentage sign needed$)$

Given the information that you have generated calculate the following items.

What is the Payback Period? $(2$ decimal places, i$.$e$.10\mathrm{.}25$ do not need to type years$)$

Using Payback as the primary decision model would the company accept this project? $($Yes or No$)$

What is the IRR of the project? $(2$ decimal places, i$.$e$.10\mathrm{.}25$ No percentage sign needed$)$

Given the IRR decision criteria would the company accept this project? $($Yes or No$)$

$($remember to use best practice rules$)$

What is the NPV of the project? $($Answer to the nearest whole dollar $$ No dollar sign needed$)$

Given the NPV decision criteria would the company accept this project? $($Yes or No$)$