Sports EX Inc. is a Sports Shoes Company which is considering investing

in a new equipment for the production..of a new line of Tennis and

Football Shoes for its elite customers. The new equipment will cost

$$250,000,$ and an additional $$80,000$ is needed for installation. The

equipment which falls into the MACRS $3-$yr class, would be sold after

three years for $$35,000.$

The equipment will generate additional annual revenues of $$210,000,$

and will have annual operating expenses of $$60,000.$ An inventory

investment of $$60,000$ is required during the life of the project.

Sports EX is in the $30$ percent tax bracket, and has the same risk as

the firm's existing assets.

The capital required for the project has been arranged as follows:

Debt: $1,0008\%,10-$year, semi$-$annual coupon bonds with a par value of

$$100,$ each selling for $90\%$ of its face value

Common stock: $2,500$ shares selling for $$96$ each with a beta of $1\mathrm{.}05.$

The market's rate of return is $11\%$ and risk$-$free investments offer a

$4\%$ return.

You are required to:

Compute the after$-$tax cost of debt

Compute the cost of common stock

Compute the WACC

Compute the initial outlay of the project

Calculate the annual after$-$tax OCF for years $1-3$

Determine the terminal cash flow for year $3$

Determine the FCF for years $1-3$

Compute the project's NPV

Estimate the project's IRR

Should the project be accepted?