2. Suppose we plan to finance the barber shop investment opportunity using the following plan. a. What is the WACC of this project, if the tax rate is 21%? Capital Source Amount Notes Bond/Debt $300 Par:100, Coupon: 5% paid semiannually, 10-year to maturity, Sell for $85.43, Equity $700 Beta: 1.5, E(r.) -10%, r = 3% Total $1,000 Step 1: Calculate the Bond YTM. Step 2: Calculate the equity CAPM required rate of return. Step 3: Follow the formula to calculate the project's WACC. b. The initial cost of the project is still $1,000. The projected cash flow is as follows. What is the project's NPV? After-Tax, end-of-year cash flows Initial Cost Year 0 1 2 3 4 5 Barber Shop -1,000 500 400 300 100 g=2% Step 1: We have the WACC of the project equals Step 2: Calculate the terminal cash flow at the end of year 4.