Husky Sporting Goods Corporation ('Husky Corp') makes high quality leather and rubber basketballs. The company is considering adding a line of soccer balls as well.

You have been hired as a consultant for Husky Corp to help in the analysis of whether the new line of soccer balls makes sense from a financial perspective. You have collected the following information about the companys capital structure:

Common Stock: 3,500,000 shares, current stock price = $10, last dividend paid was $1.00; dividend is growing at a constant growth rate of 5% a year Beta = 1.3 Preferred Stock: 450,000 shares, market price = $20, dividend every year = $1.80 Bonds: 20,000 bonds outstanding, 1000 par (face) value, currently selling at 95% of par ($950), annual coupon interest rate of 6% paid semi-annually; 8 years to maturity The risk free interest rate is 2%, the market risk premium is 9% Husky Manufacturing Corps tax rate is 21%

1. What is Husky Sporting Goods Corporation's WACC? Show how you arrived at your answer.
2. Husky Sporting Goods Corporation is evaluating a new project it would like to undertake. When conducting its capital budgeting analysis and finding NPV, what should Husky Manufacturing Corp's use as its minimum required rate of return (discount rate)? Why?