A. Yield to maturity is 6.59%. Market cap is 6.1548 billion. Beta is 1.17. Yield on 10 year treasury bond is 3.51. Market risk premium is 6%. Use the capital asset pricing model (CAPM) to calculate the cost of equity.

B. Calculate the weighted average cost of capital (WACC). The tax rate is 25%. Debt is 2,584,100.

C. The firm is considering a new project. The project will generate revenues of $18 million and operating costs (does not include depreciation) of $7,000,000 annually for the next 4 years. It requires an additional machine that costs $20 million dollars that will be fully depreciated to a zero-book value on a straight line basis over 4 years. The machine can be sold for $2,000,000 at the end of the 4 years. Initial investment in net operating working capital (NOWC) is $6 million; there is no additional NOWV investment, but $1.2 million will be returned at the end of year 4. Tax rate is 25%. Based on your estimate of the WACC, find the net present value (NPV). Should they accept the project? Explain."