4. Capital budgeting tautahi Rugby is considering adding an additional practice facility. Currently, they have 40% debt and 60% ordinary share equity. They expect to maintain this mix of debt and equity for the foreseeable future. Their debt has a current yield to maturity of 7.5%. Their common shares have a beta of 1.55 . The market return is 9% and the risk-free rate is 3.8%. tautahi Rugby has a marginal tax rate of 28%. They estimate that the practice facility will cost $780,000 to build and the new equipment to be added will cost $90,000. Both will be depreciated to zero over the 10 -year life of the practice facility. They recently did some marketing research at a cost of $75,000 and determined that they would be able to rent the facility out to other clubs. They expect additional revenue of $105,000 per year. The operating expenses associated with the new facility will be $25,000. Required You can use the formulas at the back of this question booklet. You may rip off the back page for ease of use. Provide all working. a. What is the weighted average cost of capital (WACC) for Otautahi Rugby? (10 marks) b. What is the required investment for this project? ( 2 marks) c. What are the annual operating cash flows during the life of the project? (9 marks) d. What is the net present value (NPV) of the project? (6 marks) e. Should they add the extra practice facility? Why or why not? (2 marks)