SFE Inc. has 1 million shares of commonstock outstanding at a book value of $40 per share. The stock trades for $50 per share. It also has $10 million in face value of debt(corporate bonds of 5 years with coupon rate10.5%)that trades at 110% of face value.The companys equity beta is 1.2. The risk-free rate is4% and the market returnis10%. The tax rate is 35%.

a)What isthe total market value of equity?

b)What is the totalmarketvalue of debt?

c)What isits ratio of debt to total firmvaluein the market-value driven capital

d)What is thebefore-tax cost of debt?

e)What is the after-tax cost of debt?

f)Whats the cost of equity?

g)Whats the after-tax WACC?

h)The company is considering a projectwhich requires purchasing amachine for$200,000 today(year 0). The machinewill be depreciated straight-line over the next 5 years to a salvage value of zero. The revenuefrom this project is$350,000 each year, foryears 1 to 5. The cost ofgood soldis $250,000 every year. Fixedoperatingcostis $30,000each year, for the next five years. What is the NPV of the project?(4 point)