The new Designer Jeans was expected to sell for $ 100 per unit and had projected sales of 5600 units in the first year, with a projected (Most-Likely scenario) 19.0% growth rate per year for subsequent years. A total investment of $ 747,000 for new equipment was required. The equipment had fixed maintenance contracts of $ 302,294 per year with a salvage value of $ 142,759 and variable costs were 10 % of revenues. Shantel also needed to consider both the Best-Case and Worst-Case scenarios in the analysis with growth rates of 29.00 % and 1.90 % respectively.

The new equipment would be depreciated to zero using straight line depreciation. The new project required an increase in working capital of $ 137,140 and $ 20,571 of this increase would be offset with accounts payable.

The company currently has 1183000 shares of stock outstanding at a current price of $ 84.00. Even though the company has outstanding stock, it is not publicly traded and therefore there is no publicly available financial information. However, after analysis management believes that its equity beta is 1.03.

The company also has 85000 bonds outstanding, with a current price of $ 1,007.00. The bonds pay interest semi-annually at a coupon rate of 4.70 %. The bonds have a par value of $1,000 and will mature in 6 years. The average corporate tax rate was 31 %.

Management believes the S&P 500 is a reasonable proxy for the market portfolio. Therefore, the cost of equity is calculated using the company's equity beta and the market risk premium based

on the S&P 500 annual expected rate of return - Shantel would calculate the monthly expected market return using 5 years of past monthly price data available in the worksheet Marketdata. This would then be multiplied by 12 to estimate the annual expected rate. Shantel remembered that if the expected rate of return for the market was too low, too high, or negative, a forward looking rate of an historical average of about 9.5% would have to be used, as the calculated value for the current 5-year period may not be representative of the future. Shantel would consider a E(Rm) between 8-12% acceptable. Shantel would calculate the market risk premium: E(Rm) - Rf from the previous calculations using the risk-free rate data available in the worksheet Marketdata. Shantel noted that the risk-free rate was on an annual basis.

Company =	1.03
Risk Free Rate (Rf) =	1.60%

This is One Question with Multiple Parts

Calculate the weights of Equity and Weights of Debt for the firm. Use the stock and bond data provided in the case.
Calculate the Cost of Equity for the firm. Use the CAPM and the Market data provided on on the Worksheet "MarketData".
Calculate the Cost of Debt for the firm.
Calculate the after-tax cost of debt. Use the given tax rate for the firm.
Calculate the WACC (Weighted Average Cost of Capital) for the firm.
Compute the Net Cash flows for Years 0 - 4.
Compute the PV of Net Cash flows for Years 0 - 4.
Compute the NPV of the Net cash flows