Question 1. Boxton, Inc. is considering a project with an estimated return on 10%. Its capital structure consists of 60% debt and 40% equity. Its borrowing rate is 6% and cost of equity is 10%. Its tax rate is 30%. (1) Calculate Boxton's weighted averaged cost of capital; and (2) should Boxton undertake the project? Why or why not
Question 2. Parvis, Inc., a U.S. Company is expecting cash flows in Australian dollars of: A$1 million, AS1.5 million, and AS .5 million in years 1, 2, and 3, respectively. The forecasted exchange rates are $1.03 year 1, $1.04 year 2, and $1.05 year 3. (1) Calculate the US dollar value of the cash flows by year; and (2) the total cash flow for the 3 years. Show how you derive answers.