Glitter inc. uses 25 percent common stock and 75% debt to finance their operations. The after-tax cost of debt is 7 percent and the cost of equity is 13 percent the management of glitter inc. is considering an expansion project that costs $1.2 million. The project will produce a cash inflow of $45,000 in the first year and 200,000 in each of the following 10 years (I.e, $200,000 in years 2 through 11). What is the WACC and should Glitter Inc. invest in this project?

Use one of four options in picture.

Glitter Inc. uses 25 percent common stock and 75 The management of Inc. considering an e $200,000 in years 2 through 11) What is the WAC O 10 percent, no because the NPV is negative 10 percent, yes because the NPV is positive O 8.5 percent, no because the NPV is negative O 8.5 percent, yes because theNPV is positive UESTION 34