1: CLO4 and CLO5 (20 marks) a) Hatch Corporation's target capital structure is 40% debt, 50% common stock, and 10% preferred stock. Information regarding the company's cost of capital can be summarized as follows: The company's bonds have a nominal yield to maturity of 7%. The company's preferred stock sells for $40 a share and pays an annual dividend of $4 a share. The company's common stock sells for $25 a share and is expected to pay a dividend of $2 a share at the end of the year (i.e., D1 = $2.00). The dividend is expected to grow at a constant rate of 7% a year. The company has no retained earnings. The company's tax rate is 40%. What is the company's weighted average cost of capital (WACC)? (6 marks) b) BPM Ltd. has the following capital structure: 40% debt and 60% equity. The cost of equity is 16%. Its before tax cost of debt is 8%, and its corporate tax rate is 40%. BPM is considering between two mutually exclusive projects that have the following cash flows: Which project should BPM choose? (7 marks) c) Mr. Amila is considering to invest $350,000 in a Hardware business. The cash inflows during the first, second and third years are expected to be $125,000, $150,000 and $170,000 respectively. Cost of capital is 11% Calculate the IRR (using 10% and 15% for your analysis) for the proposed investment and interpret your answer. (6+1=7 marks)