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Unformatted text preview: has been 15% and the risk free rate is equal to 2%. Whimsical Whiskey has a 30% tax rate. Answer the following questions: a) What is the yield of the companys bond? b) What is the required rate of return on their equity? c) What is the firms WACC (Weighted Average Cost of Capital)? d) What is the NPV of this project? e) What is the projects IRR? f) Should the project be accepted? 3) You are looking to buy a new AC unit for RCB. You are debating between two different units. The first unit (unit A) has a cost of $40,000 and will have operating costs of $8,000 per year. The units life is 5 years. The second unit (unit B) has a cost of $80,000, but operating costs will be $4,000 and the units life will be for 8 years. If the required rate of return for RCB is 6%, answer the following questions: a) What is the equivalent annual cost of unit A? b) What is the equivalent annual cost of unit B? c) Which unit should RCB choose?...
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- Fall '11
- Corporate Finance