Consider a firm whose debt has a market value of $55 million and whose stock has a market value of $105 million. The firm pays a 6 percent rate of interest on its new debt and has a beta of 0.85. The corporate tax rate is 30 percent. Assume that the security market line holds, that the risk premium on the market is 12.5 percent, and that the current Treasury bill rate is 4 percent.

What is this firm's WACC?

If the firm is evaluating a new investment project that has the same risk as the firm, what rate should the firm use to discount the project's cash flow