Your task is to find the cost of capital (WACC) for a company. The company has three sources of capital available. The marginal tax rate for the company is 35%.

Common stock: 100 000 shares outstanding with the book value of $20 but currently trading at P/B=2.0. One may apply CAPM to estimate the cost of equity. Inputs for estimations are: risk free rate 2.8%, market risk premium 10.0% and the stock beta is 1.20.

Debt: 2 000 discount bonds with $1 000 par value, with 4 year to maturity. Bonds currently offer 6% yield to bondholders.

Preferred stock: 14 000 shares outstanding with $90 market price and 7% yield.

Find the cost of each financing source, capital structure weights for each source and the WACC.

At L's Insurance Company, a surcharge (an extra cost) is added to the insurance premium if the driver has points on his or her license. If the driver has no points, there is no surcharge. If the driver has 1 to 4 points, the surcharge is 8% of the insurance premium. If the driver has 5 to 8 points, the surcharge is 15% of the insurance premium. If the driver has 9 points, the surcharge is 18% of the insurance premium. If the driver has 10 or more points, the surcharge is 23% of the insurance premium. Write a complete Java program that includes the statements to read in the insurance premium and the number of points from the keyboard using the Scanner class. The program should then calculate the surcharge and the total cost, which is the sum of the premium and the surcharge. Use constants where applicable and format your output with System.out.printf method.

Class Name: InsuranceCost

Sample Output:

Enter insurance premium amount: #####

Enter the number of points you have: ##

Your surcharge is: $###,###.##

Your total cost for insurance is: $###,###.##

1. Gutweed Co. is considering a project with an initial cost of $4 million. The project will produce cash inflows of $1.5 million a year for five years. The firm has a weighted average cost of capital of 9%. Assume that the project has an average risk level as the whole firm. What is the net present value of the project?

   		$1.83 million
   		$3.22 million
   		$0.92 million
   		$2.41 million

Given the following data for a stock: beta = 1.2; risk-free rate = 3%; market rate of return = 13%; and expected rate of return on the stock = 17%. Then the stock is:

Kolby’s Korndogs is looking at a new sausage system with an installed cost of $685,000. The asset qualifies for 100 percent bonus depreciation and can be scrapped for $91,000 at the end of the project’s 5-year life. The sausage system will save the firm $195,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $47,000. If the tax rate is 21 percent and the discount rate is 10 percent, what is the NPV of this project?

1. Which one of the following factors is not considered in calculating the firm’s cost of equity?

1. risk free rate of return
2. beta
3. interest rate on corporate debt
4. expected return on equities
5. difference between expected return on stocks and the risk free rate of return

2. Which one of the following factors is not considered in calculating the firm’s cost of capital?

1. cost of equity
2. interest rate on debt
3. the firm’s marginal tax rate
4. book value of debt and equity
5. the firm’s target debt to equity ratio

3. A firm’s leveraged beta reflects all of the following except for

1. unleveraged beta
2. the firm’s debt
3. marginal tax rate
4. the firm’s cost of equity
5. the firm’s equity

Explain how the cost of capital (rate) is calculated and how it is used in capital budgeting decisions.

If the demand curve is Q(p) = 15 -p and the marginal cost is constant at 3, what is the profit maximizing monopoly price and output? What is the price elasticity at the monopoly price and output?

Kolby’s Korndogs is looking at a new sausage system with an installed cost of $670,000. This cost will be depreciated straight-line to zero over the project’s 5-year life, at the end of which the sausage system can be scrapped for $88,000. The sausage system will save the firm $213,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $41,000. If the tax rate is 23 percent and the discount rate is 11 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Marshall Inc., is looking at a new bottle system that costs $473,522. It will cost an additional $63,445 to modify the system for special use by the firm. The new equipment is classified as five-year property under MACRS (20%, 32%, 19.20%, 11.52%, 11.52%, and 5.76%). Suppose the bottle system will be scrapped for $70,609 at the end of year 4. The new system will increase pre-tax revenues by $249,600 per year, but pre-tax costs will also increase by $40,080 per year. The system requires an initial investment in net working capital of $39,616. If the tax rate is 32 percent and the discount rate is 6.37 percent, what is the NPV of this project?

[Round the final answer to the nearest cent]

) Dog Up! Franks is looking at a new sausage system with an installed cost of $411,500. This cost will be depreciated straight-line to zero over the project's seven-year life, at the end of which the sausage system is expected to be sold for $35,000 cash. No bonus depreciation will be taken. The sausage system will save the firm $129,400 per year in pretax operating costs, and the system requires an initial investment in net working capital of $22,500. All of the net working capital will be recovered at the end of the project. The tax rate is 23 percent and the discount rate is 13.2 percent. What is the net present value of this project

P.S How to calculate NPV, explanations needed!!!