and the market risk premium is &pervenLat suvt 6. Westcon is considering building a facility to tap thermal energy using wind power. Parto the project's cost, $750,000, can be financed with a loan from the l'ederal Energy Commission at the below-markct rate of 5 percent. The remainder , $250,000, can be financed ith an industrial revenue bond at 10 percent. No debt is being displaced. Current debt rates for Westcon are 15 percent. The project should generate before tax cash flows of $1,500,000 per year for ten years. Westcon has a 40 percent tax rate, and the D/E ratio is.50. Westcon estimates that the project beta is 1.50 and forecasts a risk-free rate of 10 percent for the life of the project. The return on the market is estimated to be 20 percent. a. Should Westcon undertake the project? b. Assuming the project is of the same risk as Westcon itself, would the project be acceptable without the subsidies? Explain