Your employer is considering an investment in new manufacturing equipment. The equipment costs RO 200,000 and will provide annual after-tax inflows of RO 30,000 for 13 years. The firm's market value debt/equity ratio is 0.5. The risk free rate is 5% and the market risk premium is 7%. The firm's systemic risk is 1.3. The pretax cost of debt is 6%. The flotation costs of debt and equity are 2% and 4%, respectively. The firm's tax rate is 30%. Assume the project is of approximately the same risk as the firm's existing operations.

a-What is the weighted average cost of capital?

b-Ignoring flotation costs, what is the NPV of the proposed project?

C. After considering flotation costs, what is the NPV of the proposed project?

4. Calculate the equity multiplier of the ABC Company if the total debt ratio of is 1.5.