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Question 7 : Anna is a Vice President at the J Corporation. The company is considering investing in a new factory and Anna must decide whether it is...

-0.90         

Beta of J Corp.'s stock = 2.0

Expected rate of return on J Corp. stock for the coming year = 14.10%

(I was able to get the first part of this question but the rest of it is confusing me and will need to know how to do this for my final. I tried to include as much information as possible as I'm not sure exactly what is needed)

Now that Anna has determined an appropriate rate of return for J Corp.'s stock, she must calculate the firm`s Weighted Average Cost of Capital. There are currently 51.5 million J Corp. common shares outstanding. Each share is currently priced at $7.69. As well, the firm has 5000 bonds outstanding and each bond has a face value of $10,000, a yield to maturity of 3.59% and a quoted price of $10,159.10. J Corp.'s tax rate is 30% J Corp. has no preferred shares outstanding.

C) What is J Corp.'s WACC? (Rounding to one hundredth of a %)

The land for the factory will cost $210,000. The factory will cost $5,910,000 to build and construction will take two years with construction costs payable in equal installments at the start of each year. The factory will operate for 20 years; however at the end of the fifth, tenth, and fifteenth year of operation, refurbishment costs will be $910,000. At the end of its 20 year lifespan, the land can be resold for $230,000. There is a 70% probability that the factory's net operating cash flows will be $1,246,901; however there is a 30% chance that net cash flows will only be $888,085. Assume that net operating cash flows flow at the end of each year.

D) What are the expected net operating cash flows per year?

E) What is the Internal Rate of Return for the project?

F) What is the Net Present Value of the project?

G) Should Anna recommend that the J Corporation build the factory? Yes or No?  

Richard has just received an unexpected bonus at work worth $2,750 and, given the J Corp.'s reputation for excellent investment decision making, he will invest the entire bonus in J Corp. stock. Given the rates of return for stocks A, B, C, and D listed above and the rates of return for J.Corp stock and the market presented, as well as the cash amounts he is investing in stocks A, B, C, and D;

H) What is the beta of Richard's portfolio?

I) Would you describe Richard's portfolio as aggressive, defensive, or neither of the two? 

Thank you very much in advance. I'm not a finance student so I really need to study these in order to learn them and this is the only question I have left.

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