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1. Use the information for the question(s) below. Iota Industries Market Value Balance Sheet ($ Millions) and Cost of Capital Liabilities Cost of Capital Debt

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1. Use the information for the question(s) below. Iota Industries Market Value Balance Sheet ($ Millions) and Cost of Capital Liabilities Cost of Capital Debt 400 Debt 7% Equity 800 Equity 14% TC 35% Iota Industries New Project Expected Free Cash Flows Year 0 1 2 3 Free Cash Flows ($250) $75 $150 $100 Assume that this new project is of average risk for Iota and that the firm wants to hold constant its debt to equity ratio. (a) What is Iota's weighted average cost of capital? (b) What is the NPV for Iota's new project? (c) What is the Debt Capacity for Iota's new project in year 0

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