1. Harley Motors has $11 million in assets, which were financed with $3.3 million of debt and $7.7 million in equity. Harley's beta is currently 0.9 and its tax rate is 40%. Use the Hamada equation to find Harley's unlevered beta, bU. Round your answer to two decimal places.
2. Bolman corporation is considering an expansion project that will begin next year ( time 0). Bolman cost of capital is 12%. Reinvestment rate is 15%. The initial cost of the project will be $250,000 and it is expected to generate the following cash flows over its five-year life:
year $
1 $40,000
2 $60,000
3 $90,000
4 $90,000
5 $90,000
What is the Modified Net Present Value ( MNPV ) for the expansion project?
a. $268,811
b. $119,025
c. $25,726
d. $18,811
e. $5,871