Clorox wants to pursue a project that will broaden the markets in which they currently participate. The new project is expected to generate a return of 3.78% (Instructor hint: in the end after you figured out the WACC you need to compare the WACC with this return to make a decision on whether not to accept the project). They want to know what they should use for a hurdle rate or WACC (weighted average cost of capital). Your job is to perform the WACC calculations and advise them as to whether they should invest in this new project or not. You get the following from their accountant. Common stock is selling for $135 a share. The current annual dividend is $3.2 and the dividend growth rate is expected to be 3.2% a year. The stock's beta is 0.45. Preferred stock sells for $148 and pays an annual dividend of $15. There are currently 15 years callable, 3% coupon bonds available with the yield to maturity (YTM) of 3.05%. There are 20 year, non-callable 6% coupon bonds with the yield to maturity (YTM) of 4.84%. There are 5 year 7% coupon bonds with the yield to maturity (YTM) of 2.15%. The bond-yield risk premium is 3%. The current risk-free rate is 5% and the market risk premium is 7.8%. (Hint: this is for using CAPM model) Clorox has a target capital structure of 20% debt, 7% preferred stock and 73% common equity and its current tax rate is 34%. QUESTION 15 What is Clorox's after tax cost of debt (rounded to two decimal places)? O A. 2.01% B. 1.42% C. 4.39% OD.3.19% E. 3.96% QUESTION 17 What are the three ways that we use to calculate the cost of common equity? O A CAPM, YTM, and Bond yield + risk premium OB. CAPM, DCF, and Bond yield + risk premium OC. CAPM, YTM, and DCF OD. CAPM, DCF and Bond yield + market premium QUESTION 18 What is Clorox's cost of common equity using the DCF method? A. 2.36% OB.5.57% C. 5.65% OD. 5.00%