11- Exxon Corp wants to evaluate a new oil and gas investment. Currently, Exxon has a debt to equity ratio of 1:3. Exxons cost of equity is 16.2%, cost of debt is 5.5%, and tax rate is 30%. For the new project Exxon wants to finance the project with 50% debt and 50% equity (debt to equity ratio of 1). Assume the cost of debt will be the same under the new capital structure. What discount rate (WACC) should Exxon use to for this new project? (Hint: First, calculate what the new cost of equity) (Answer in %. Ex for .6789 put 67.89%)

12- Given Q11. The new investment will cost Exxon $10 M today and give cash flows of $5 M for 5 years, starting a year from today. Should Exxon invest in this project? (If you did not complete Q11, you can use a WACC of 10%; 10 may not be the correct answer to Q11 but will give the correct sign on NPV for 8.)

Yes

No