BMI is considering a project with an initial investment of $1,115,000. The annual cash flow of the project is $119,000 and is expected to continue forever (perpetuity). The discount rate (r or WACC) for the project is 10%. The company can issue common equity at a flotation cost of 8.5%, debt at 6.0% and preferred stock of 7.0%.The firm currently has a capital structure: 60% common equity, 10% preferred, and 30% debt. The firm is considering two scenarios . First, all funds raised externally, Second, 40% common equity will come from retained earnings (internal sources).

1) What should the firm use as their weighted average flotation cost for the 2 scenarios?

2) If the firm has to invest $1,155,000 in the project how much money does it have tp raise (round to the nearest dollar) in the 2 scenarios

3) What is the present value of the cash flows of the project (perpetuity cash flow)

4) Should the firm invest in the project if (a) there were no flotation costs (b) first scenario (c) second scenario and why