4. Burger World Inc considers an expansion project. It currently has 10 million outstanding shares trading at $30 per share. Equity has an estimated beta of 1.5 . The risk-free rate is 2.5%, while the market risk premium is 5%. It also has 200,000 outstanding bonds with 20 years to maturity, 8% coupon rate, $1,000 par, currently trading at par. The corporate tax rate is 25%. The project will require an investment if $100 million and will produce a net after tax cash flow of $15 million per year for 20 years. Calculate the WACC (Weighted Average Cost of Capital), the project NPV and determine whether Burger World should accept the project? 5. The Wraith Food Company is an all equity financed firm. Its stock beta is 1.40 , while the risk-free rate is 2% and the market expected risk premium is 5%. The firm's CFO considers several projects. He decides to follow the hurdle rate test, comparing the project's return to the firm's cost of capital. Which of the projects will he reject incorrectly, and which will he accept incorrectly? Hint! You can present the hurdle rate decision side by side with the NPV or IRR decision. Conflict between the two methods, will mark incorrect decision