You are the CFO of the Imaginary products co. the company provides the following information about is capital structure:

Debt: the firm has 300,000 bonds outstanding with a par value of $1,000, pays 8.6 percent interest (semi annual coupon payments), have maturity of 25 years and have a quoted price of 117.50 percent of part value.

Preferred Shares: The firm also has an issue of 6 million preferred Shares outstanding with a market price of $15.00 per share. the preferred Shares pay an annual dividend of 3.6 percent on the par value of $50.00.

Common Stock: The company also has 17 million shares of common stock outstanding with a price of $25.00 per share. the firm just paid common dividend of $3.00 and dividend of expected to increase by t percent per year forever.

The firm is considering a the year expansion project (same operations as the existing projects of the firm) that requires a purchase of a machine of $450,000. there will be an increase in inventory of $175,000, accounts receivable of $55,000, and accounts payable of$60,000. The machine will be in the 3 year MARCS class and the annual depreciation rate are 33 percent in year 1, 44 percent in year 2, 15 percent in year 3, and 8 percent in year 4.

The project is expected to generate Earnings before interest, taxes, depreciation, and amortization (EBITDA) of $225,000 each year. At the end of the project (year 3), the machine can be sold for $25,000. The firms tax rate is 21 percent.

1. Find the cost of common equity.

2. Solve for the cost of preferred stock.

3. Solve for the before-tax and after-tax cost of debt.

4. Calculate the weights of equity, debt, and preferred stock.

5. what is the firms weighted average cost of capital?

6. what is the initial investment at time 0?

7. what is the annual depreciation in years 1, 2, 3?

8. what is the annual cash flow from operations in year 1, 2, and 3?

9. compute the after-tax salvage value in year 3.

10. what is the terminal cash flow in year 3?

11. what is the free cash flow or net cash flow in years 0, 1, 2 and 3?

12. Calculate the NPV, IRR, MIRR (assuming the reinvestment rate is 11 percent), Profitability Index ratio, payback period, and discounted payback period for projects.

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