You recently went to work for CTC Components Company, a supplier of auto repair parts used in the after-market with prod

[answerhappygod]

You recently went to work for CTC Components Company, a supplier
of auto repair parts used in the after-market with products from
Daimler AG, Ford, Toyota, and other automakers. Your boss, the
chief financial officer (CFO), has just handed you the estimated
cash flows of a proposed project.
Cost of the project: $200,000
Year
After tax Cash flow
1
$45,000
2
$45,000
3
$45,000
4
$45,000
5
$45,000
CTC’s assets are $750 million, financed through bank loans,
bonds, preferred stocks, and common stocks. Tax rate is 40 percent.
The amounts are as follows:
Bank loans: $ 100 million borrowed at 3%
Bonds: $280 million, paying 5% coupon with
semi-annual payments, and maturity of 10 years. CTC sold its $1,000
par-value bonds for $1050 and had to incur $50 flotation cost per
bond.
Preferred Stocks: $120 million, paying $15
dividends per share. CTC sold its preferred shares for $210 and had
to incur $10/share flotation cost.
Common Stocks: $250 million, beta is 2, the
risk-free rate is 2 percent, and the market rate is 6%.