Sims & Company is brainstorming on if it is a good idea to invest in a short-term installation project. The investment has the following projected cash flows seen below:

Required Initial Investment $5000,000

Year 1: $200,000

Year 2: $100,00

Year 3: $100,000

Year 4: $0

Year 5: $250,000

This project will also yield $50,000 salvage value at the end of the 5^th year through the sale of used machinery. Sims & Company has a D/E ratio of 2/1. The current bond ($1000 face-value) for Sims is selling for $1050. This bond has a coupon rate of 6% which are paid semi-annually and 10 years to maturity. Sims is using the Capital Asset Pricing Model to calculate its cost of equity. It has a beta of 1.5. The current 5-year Treasury Bond has a 3.5% yield. For the corresponding period, the S&P 500 index has a return of 12%. The applicable corporate tax rate for Sims & Company is 20%.

1. What is the cost of debt for Sims & Company before taxes?

2. What is the cost of debt after taxes?

3. What is the cost of equity?

4. What is the weighted average cost of capital?

5. What is the NPV for this project, is it a good investment?