these questions are related please solve them all

Crown Corporation plans to issue long-term debt to purchase new capital equipment to expand its operations (Project Omega). Based upon todays bond market, Crown determines that it can borrow $250 million for 5 years with an annual coupon of 5.25%.

a.) What is Crowns annual interest expense under the new bond issuance?

b.) Assume that Crown issues the debt to investors at par. After two years, (i.e., following payment of the second annual coupon), the yield on Crowns debt increases to 7.5% due to higher interest rates and a deterioration of Crowns financial position. Calculate the current price (as a percentage of par) of Crowns debt and explain whether the bond is trading at a discount or premium.

c.) Crowns financial manager estimates that the company will be able to generate an additional $58,143,330 in EBIT for each of the five years due to the equipment purchase. Calculate the expected net present value of the investment based upon Crowns borrowing cost and explain whether or not the company should borrow and pursue Project Omega. Would you answer this differently if you were a shareholder as opposed to a bondholder?

Crowns CFO asks her financial manager to consider two alternative, smaller projects (Alpha and Beta) in order to draw a comparison to the new equipment purchase which was analyzed in Question 1.) The projected annual cash flows (in millions of dollars) of Alpha and Beta are outlined below and she asks you to use a 7.5% discount rate:

CF0 CF1 CF2 CF3

Alpha -150 50 70 90

Beta -55 25 20 20

a.) Calculate the Profitability Index of Project Alpha and Beta with a discount rate of 7.5%

b.) Calculate the NPV of Projects Alpha and Beta at 7.5%

c.) Calculate the IRR of Alpha and Beta. How would you rank Alpha versus Beta?

The CFO has asked you to summarize the results of your analysis across Projects Alpha, Beta and Omega for an upcoming presentation to shareholders.

a.) Summarize and rank the expected returns on Projects Alpha, Beta and Omega. Assuming that Crown can borrow at the same yield for three or five years, would you suggest she recommend issuing debt to pursue one or more of these investments?

b.) Now consider an alternative case where Crown has significant cash on hand following the sale of long-term assets. How does this affect your answer in a.)?