1. Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube Goldberg Machines. This new equipment, the RGM-7000, will allow Caspian Sea Drinks to expand production. It will cost $13.00 million fully installed and will be fully depreciated over a 20 year life, then removed for no cost. The RGM-7000 will result in additional revenues of $2.78 million per year and increased operating costs of $646,907.00 per year. Caspian Sea Drinks' marginal tax rate is 31.00%. If Caspian Sea Drinks uses a 11.00% discount rate, then the net present value of the RGM-7000 is _____.

2. Caspian Sea Drinks' is financed with 66.00% equity and the remainder in debt. They have 11.00-year, semi-annual pay, 5.06% coupon bonds which sell for 98.69% of par. Their stock currently has a market value of $25.04 and Mr. Bensen believes the market estimates that dividends will grow at 3.74% forever. Next years dividend is projected to be $2.65. Assuming a marginal tax rate of 28.00%, what is their WACC (weighted average cost of capital)?