Capital Budgeting Case From the given case information, calculate the firms WACC then use the WACC to calculate NPV and evaluate IRR for proposed capital budgeting projects with a capital rationing constraint. After you choose the project(s), recalculate the capital structure based on the assumption that the project(s) are implemented and determine if the new capital structure will signal the investors either positively, negatively, or not at all. Write a business report on your findings.

North Sea Oil has compiled the following data relative to current costs of its basic sources of external capital, long-term debt, preferred stock, and common stock equity Cos Source of Capital 70% Long-Term Debt 19% Preferred Stock 20% Common Stock and Retained Earnings Below are the company's target capital structure proportions used in calculating the weighted average cost of capital. Source of Capital Target Capital Structure Long Term Debt .25 25 Preferred Stock Common Stock and Retained Earnings 50 North Sea Oil has the opportunity to invest in the following projects: Project A Project B $85,000 Initial $130,000 Investment Year Cash Inflows Cash Inflows S40,000 $25,000 2 $35,000 $35,000 $45,000 $30,000 4 $50,000 $10,000 5 $55,000 S5,000 Using WACC to calculate the NPV and evaluate the IRR, which project should be implemented? ou may also wish to include Payback to further support your answer) Assuming the project (s) is implemented using equity financing, the capital structure changes to Source of Capital New Capital Structure after project implementation Long Term Debt .20 20 Preferred Stock Common Stock and Retained Earnings .60 Calculate the New WACC and briefly discuss in your report if this new WACC and capital structure might signal the market and investors