Covidam company clinches a contract to supply cleaning services to nursing home for the next 5 years. under the contract

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Covidam company clinches a contract to supply cleaning servicesto nursing home for the next 5 years. under the contract, thecompany will be paid $1 million a year. To take up this contract,ot would have to invest in new cleaning equipment costing $600,000which will be depreciated straight-line to zero over 5 years. Thereis no salvage value at the end of 5 years. Labour cost will be$300,0000 per year and overhead $250,000 per year. Thecompany will need to invest in net working capital of$350,000..
It plans to issue $1 million worth of bonds for 5 years at acoupon rate of 6% and will price the bonds at par. The company hasan existing bank loan of $9 million. The cost of debt from the bankloan is the same as the bonds.
The common stock of the company is selling for $10 per share andit has 2 million shares outstanding. Expected dividend next year is$1 per share and dividends are expected to grow at 2% per annuminto the foreseeable future. The tax-rate is 20%.
(a) Compute the Cost of Equity of the company.
(b) without any calculation, determine the cost of debt of thecompany.
(c) calculate the weighted average cost of capital of thecompany.
(d) calculate the initial cash flow of the project.
(e) determine the operating cash flows of the project
(f) compute the cash flow from the assets for the project
(g) compute and analyse whether the project should be acceptedusing NPV and a required return of 10%. without doing anycalculations, explain what you expect the IRR to be relative to therequired rate of return.