Assumptions: 1. The life of the project is expected to be 5 years. Please assume that the analysis is taking place at the end of 2021. 2022 will be the first year of operation. 2. T-shirt Corp. needs to invest in a machine that would print designs on the t-shirts. The machine costs $10,000 and will be depreciated fully using a straight line method over 10 years. At the end of 2023, the machine will be sold for $2,000.

	2022	2023	2024	2025	2026
Number of t-shirts	2,000	3,000	4,000	5,000	6,000

4. The price of a t-shirt will be $15 in 2022 and will increase by 3% per year in the following years. 5. The cost of goods sold for one t-shirt will be $6 in 2022 and will remain the same in the following years. 6. The company will rent a store to run its operations. The rent and utilities is expected to cost $10,000 in 2022 and will increase by 2% each year afterwards. 7. In order to run the t-shirt venture, the Balanced Corp. will need to have 10% of the following years sales in its net working capital account. 8. Balanced Corp. will spend $5,000 for marketing each year starting in 2022. 9. The company spent $5,000 for market research in 2020. 10. Tax rate (federal plus state) is 25%. 11. The cost of capital for this project is estimated to be 12%. As a part of cost of financing, the company will have $1,000 in interest expenses each year.

Please write down the WACC formula and explain the intuition behind the formula. Then explain how you would go about estimating the WACC. Make sure you cover how to estimate cost of equity, cost of debt, shares of equity and debt