1. A proposed capital project will cost $20 million and generate $4 million annually in after-tax cash flows for 10 years. The cost of capital for a project of this risk level is 12.2%. Should the project be accepted? Why or why not?
2. Discuss how betas are measured for individual stocks.
3. Arts and Crafts Warehouse wants to issue 15-year, zero-coupon bonds that yield 7.5 percent. What price should it charge for these bonds? Assume semiannual compounding. Please provide steps.