1.  Find the NPV and PI of a project that costs $1,500 and returns $800 in year 1 and $850 in year 2.  Assume the project's cost of capital is 8%.

2.  AA Auto Parts Company has a corporate tax rate of 34 percent
and depreciation of $19,180. Compute its depreciation tax shield.

3. The Nutrex Corp. wants to calculate its weighted average cost of capital.  Its target capital structure weights are 40% long-term debt and 60% common equity.  The before-tax cost of debt is estimated to be 10% and the company is in the 40% tax bracket. The current risk-free interest rate is 8% on Treasury bills.  The expected return on the market is 13% and the firm's stock beta is 1.8.

a. What is Nutrex's cost of debt?

b. Estimate Nutrex's expected return on common equity using the security market line.

c. Calculate the after-tax weighted average cost of capital.