Answer Happy

Should we proceed with this project?
Initial Investment = $5,000,000 Taxes = 35% Beta = 1.27 T note =
2.4% Dividends paid = $1,000,000 with a payout ratio of 33%
Estimated sales are: $2,500,000 for year 1, $4,000,000 for year 2,
$7,000,000 for year 3, $6,000,000 for years 4 & 5, $4,000,000
for year 6, and $1,500,000 with a sale of the asset in year 7 for
$250,000. Variables costs are 52% Fixed costs = $400,000 per year
The company’s benchmark is the Wilshire 5000, which is expected to
return 11% next year. 250,000 shares of common stock quoted today
at $25, paying a dividend of $1.20 per share. 100,000 shares of
preferred stock quoted today at $45, paying a dividend of $2.50 per
share. The company is paying on 20-year 4.75% loan issued 5 years
ago with today’s principal =$2,750,000 Two bonds are outstanding:
1) 20-year bond issued 5 years ago with a coupon rate of 4.25% with
today’s market rate = 3.75%, there are 2,000 bonds. 2) 15-year bond
issued 3 years ago with a coupon rate of 3.88% with today’s market
rate = 3.6%, there are 2,500 bonds. Companies estimate its return
on equity is 12%