The Phillips Company is considering increasing its headphone production capacity to fulfill a large private contract. The CFO has tasked her finance staff to analyze the project and make a recommendation to the executive team to be included at next month$$s board meeting. The CFO provides the following information to the analyst:

COST OF CAPITAL

Phillips$$ current capital structure is comprised of $$300,000,000$ in debt, $$150,000,000$ in preferred equity, and $$450,000,000$ in common equity. Phillips currently has issued bonds that mature in $10$ years with a coupon rate of $7\mathrm{.}5\%$ and a current market price of $$865.$ Preferred shares of Phillips are trading at $$67/$share and pay an annual dividend of $$1\mathrm{.}75/$share$.$ Common stock of Phillips has a beta of $1\mathrm{.}1$ and trades at $$46/$share$.$ The $10-$year US treasury yield is $4\mathrm{.}25\%.$ The market risk premium is estimated at $7\mathrm{.}75\%.$ Their tax rate is $35\%.$

Round answers to four decimal places $($ie $\mathrm{.}1125$ or $11\mathrm{.}25\%)$

What is the current cost of Phillips debt capital?

$[$ Select $]$

What is the current cost of Phillips preferred equity capital?

$2\mathrm{.}61\%$

What is the current cost of Phillips common equity capital $($using CAPM$)?$

$[$ Select $]$

What is Phillips Weight Averaged Cost of Capital?

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Use your answers above and the information below to complete the remaining questions.

PROJECT CASH FLOWS

Philips expects to invest $$18,500,000$ in new$/$plant equipment. The contract will last for $10$ years, at which point it expects its plant equipment to have a salvage value of $$7,000,000.$ They plan to finance this project using $65\%$ debt and $35\%$ equity. Their investment banker advises there are transaction costs of $2\mathrm{.}0\%$ on debt and $11\mathrm{.}0\%$ on equity. Phillips expects to increase its accounts receivable by $$1,500,000,$ its inventory by $$4,000,000,$ and its accounts payable by $$2,500,000.$ It expects to sell $45,000$ units at a price of $$275/$unit$,$ with variable cost per unit of $$165.$ It expects additional operating costs each year of $$900,000.$ Phillips tax rate is $35\%.$

What is the annual depreciation for the fixed assets of this project?

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What is the firm$$s weighted average flotation cost? $($round to four decimal places$)$

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What is the firm$$s flotation adjusted Initial Capital Expenditure? $($round to nearest $$100,000)$

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What is the projected Cash flow at Year $0?($round to nearest $$100,000)$

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What is expected Cash flow Year $1-9?($round to nearest $$100,000)$

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What is the expected Cash Flow of Year $10?($round to nearest $$100,000)$

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What is the project$$s Net Present Value?

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What is the project$$s Internal Rate of Return?

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What is Phillips Accounting Break$-$even unit sales level?

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What is Phillips Cash Break$-$even unit sales level?

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