$1.$ Calculating Sangria's WACC

Sangria is a U$.$S$.-$based company whose products aim to promote happy, low$-$stress lifestyles. Let's calculate Sangria's WACC. Its book and market$-$value balance sheets are:

We calculated the market value of equity on Sangria's balance sheet by multiplying its current stock price $($$$7\mathrm{.}50)$ by $100$ million, the number of its outstanding shares. The company's future prospects are good, so the stock is trading above book value $($$$7\mathrm{.}50$ vs$.$ $$5\mathrm{.}00$ per share$).$ However, interest rates have been stable since the firm's debt was issued and the book and market values of debt are in this case equal.

Sangria's cost of debt $($the market interest rate on its existing debt and on any new borrowing$)$ is $6\%.$ Its cost of equity $($the expected rate of return demanded by investors in Sangria's stock$)$ is $12\mathrm{.}4\%.$

The market$-$value balance sheet shows assets worth $$1,250$ million. Of course we can't observe this value directly, because the assets themselves are not traded. But we know what they are worth to debt and equity investors $($$$500+750=$ $$1,250$ million$).$ This value is entered on the left of the market$-$value balance sheet.

Sangria is consistently profitable and pays taxes at the marginal rate of $35\%.$

Question $1$: What is Sangria's after$-$tax WACC?

$2.$ Using Sangria's WACC to Value a Project

Sangria's enologists have proposed investing $$12\mathrm{.}5$ million in the construction of a perpetual crushing machine, which $($conveniently for us$)$ never depreciates and generates a perpetual stream of earnings and cash flow of $$1\mathrm{.}731$ million per year pre$-$tax.

The project is average risk of the overall company. Sangria will maintain the same capital structure for this project. Sangria pays taxes at the marginal rate of $35\%.$

Question $2$: Should Sangria take this project?