Hard Donkey Inc. (HDI) currently makes low-end office chairs that are described by at least one Amazon.ca reviewer as "the most uncomfortable piece of sh$t I've ever sat in". The firm is public, with 2.75 mln shares outstanding with a current price of $6.75 each and a beta of 2.25. The firm also has 55,000 coupon bonds outstanding. These bonds have a coupon rate of 8.15% (paid semi-annually) with nine years to maturity and a YTM of 5.55%. HDI is considering expanding into the high-end office furniture business. To do so, the firm would need to purchase new equipment at a cost of $8.0 mln plus an additional $0.95 min for installation and delivery. It is estimated that the equipment will last for four years at which time the firm will be able to salvage it for its undepreciated cost of capital. The CCA Rate for the equipment is 13.5%. Management estimate that the new product line will generate annual cash inflows of $4.15 mln while annual cash outflows are anticipated to increase by $0.75 mln. It is also anticipated that the new product line will cannibalize 5% of the existing product line, which currently generates net cash inflows of $12 mln annually. The new product line will also require the firm to increase its net working capital from 12.85 min to 14.00 mln. HDI's average tax rate is 12% while its marginal tax rate is 15%. Additionally, the anticipated risk premium on the S&P/TSX Composite Index is 5.20% while the yield on Government of Canada bonds is 1.95%. Round all final answers to two decimal places. 1. SDI's weighted average cost of capital is %.