1. 3. A well-known piano manufacturer wishes to expand in China. It decides that 80% of the $32 million it needs will come from debt, and the remaining 20% from selling equity. The cost of debt is 7% and the corporate tax is 35%. To estimate the cost of equity, the firm uses the CAPM with these parameters:

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• o What is the WACC, or hurdle rate, of the investment?
• o If the IRR of the investment is estimated at 7 %, should it proceed?

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