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1) Penny Blossoms has a target capital structure of 40% debt and 60% equity

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1) Penny Blossoms has a target capital structure of 40% debt and 60% equity. Its cost of equity is 1%, cost of debt is 5%, and its tax rate is 25%.  What is Penny Blossom's WACC?    2) What would happen to the WACC if it changed its capital structure to 50%/50% (no math just theory, explain your answer)?                                

This is problem 15 on pages 268-269 in the textbook. Use the table below to calculate the payback following. Your required return is 13% and your company mandates only projects with a 3-year payback period or less be considered.  

3) Calculate the Payback period for both of these projects. Assume the projects are mutually exclusive, which project, if any would you accept? Briefly explain your answer.     

4) Calculate the Profitability Index for both of these projects. Assume the projects are mutually exclusive, which project, if any, would you accept? Briefly explain your answer.

5) Calculate IRR for both of these projects. IRR doesn't work with mutually exclusive projects so treat them as independent. Which project, if any, would you accept? Briefly explain your answer. 

6) Calculate the NPV for both of these projects. Assume the projects are mutually exclusive. Which project, if any, would you choose? Briefly explain your answer.    

7) Based on all of the information, which project would you choose. Briefly explain your answer.                                                              

Year // Project A // Project B

0 -$245,000 -$53,000

1 $34,000.00 $31,900.00

2 $49,000.00 $21,800.00

3 $51,000.00 $17,300.00

4 $325,000.00 $16,200.00