National Electric Company (NEC) is considering a $45.07 million project in its power systems division. Tom...

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National Electric Company (NEC) is considering a $45.07 millionproject in its power systems division. Tom Edison, the company’schief financial officer, has evaluated the project and determinedthat the project’s unlevered cash flows will be $3.18 million peryear in perpetuity. Mr. Edison has devised two possibilities forraising the initial investment: Issuing 10-year bonds or issuingcommon stock. The company’s pretax cost of debt is 6.7 percent andits cost of equity is 11.5 percent. The company’s targetdebt-to-value ratio is 80 percent. The project has the same risk asthe company’s existing businesses and it will support the sameamount of debt. The tax rate is 22 percent.
Calculate the weighted average cost of capital. (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)
Calculate the net present value of the project. (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)

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National Electric Company (NEC) is considering a $45.07 millionproject in its power systems division. Tom Edison, the company’schief financial officer, has evaluated the project and determinedthat the project’s unlevered cash flows will be $3.18 million peryear in perpetuity. Mr. Edison has devised two possibilities forraising the initial investment: Issuing 10-year bonds or issuingcommon stock. The company’s pretax cost of debt is 6.7 percent andits cost of equity is 11.5 percent. The company’s targetdebt-to-value ratio is 80 percent. The project has the same risk asthe company’s existing businesses and it will support the sameamount of debt. The tax rate is 22 percent.Calculate the weighted average cost of capital. (Do not roundintermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)Calculate the net present value of the project. (Do not roundintermediate calculations and enter your answer in dollars, notmillions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)