It is the end of 2012. You have developed a method for growing cow protein in a laboratory, ending the need to raise and slaughter cattle. The protein has a uniform and high quality flavor. It is also free of impurities, diseases, and stress hormones found in protein from farm raised animals. You think you can mass produce the protein to consumers. It will have a high price, but will appeal to high-end consumers concerned about their health, the environment, and animal cruelty. You will call the company Cruelty-Free Protein (CFP). You have spent $100,000 on test marketing the protein. You have laboratory equipment and research and development that would have to be contributed that could otherwise be sold today for $1,000,000 net of taxes. You believe that after 2016 cash flows will grow by 6% per year, so that the cash flow in 2017 is 6% higher than in 2016, and so forth and so on. Your companys debt ratio will be 63%. The marginal corporate tax rate is 35%. The projected financials for the project are on the following page.

There is a publicly traded company called Soy Solutions that you believe is most comparable to your project. They have a debt ratio of 40%. The yield to maturity on their debt is 7.2%. With a debt ratio of 63%, you think that the yield to maturity on their debt would be 8.4%. They also have a marginal tax rate of 35%. Their stock beta is 1.5. The expected return on the market is 12% and the risk-free rate of interest is 5%.

**Round out to four decimal places.

Calculate R₀ (the unlevered required return on the stock) for Soy Solutions. .1299

What is R_s (the required return on equity) for CFP? .1807

What is the WACC for CFP? .1013