D$)$ XYZ Is a firm with $2$ lines of business: chain restaurants and department stores. The

firm is considering opening a new restaurant and has asked you to obtain the WACC

needed to evaluate the investment opportunity. You have the following information:

XYZ$\text{'}$s cost of equity is $15\%.$

The capital structure of $xYZ$ is $70\%$ equity and $30\%$ debt $($they don't have

preferred stocks$)$

$1$ year ago, the firm issued $10-$year, $5\%$ bonds. The bonds are selling for $95\%$

of their face value of $1000.$

The tax rate is $25\%.$

The expected return of the market is $10\%.$

The risk$-$free rate is $4\%.$

Chipotle is a pure$-$play firm in the chain restaurant business. Their capital

structure is $50$ equity and $50$ debt, and their cost of equity is $11\%.$

$1-$ Obtain the appropriate WACC for evaluating the restaurant investment

opportunity. $(10$ points$)$

$2-$ If the investment costs $$10$ million and generates project cashflows of $$1$

million indefinitely, would you say this is a profitable investment? $(10$

points$)$