Koch Nature Tours $($KNT$)$ is considering a new project. The company currently has a target debt$$equity ratio of $0\mathrm{.}75,$ but the industry target debt$$equity ratio is $0\mathrm{.}35.$ There are five other $($equal$-$size$)$ firms in the industry with the following betas: $0\mathrm{.}52,1\mathrm{.}01,0\mathrm{.}81,0\mathrm{.}68,0\mathrm{.}88.$ The market return is $9\mathrm{.}80\%,$ and the $($systematic$)$ risk$-$free rate is $3\mathrm{.}30\%.$ Assume all companies in this industry can issue debt at the risk$-$free rate. The corporate tax rate is $24\%.$ The project will be financed at KNT$$s target debt$$equity ratio. The project requires an initial outlay of $$150,000$ and is expected to result in a $$11,250$ EBIT at the end of the first year. Annual cash flows from the project will grow at a constant rate of $3\%$ until the end of the seventh year before leveling off at that same annual level $($no longer growing$)$ forever thereafter.

a$.$ Using the WACC methodology, value this project and tell whether it should be pursued. $($Hint: show all your steps along the way...you can either do this through using MMII with taxes or by unlevering the industry beta and relevering it for the company. Be sure to show your calculated WACC for the company$).$

b$.$ Show how that valuation changes if KNT uses more debt $($for example, a target debt$-$equity ratio of $1\mathrm{.}5)$ and explain whether it changes your recommendation or not. Explain why this shift in capital structure changes the value of the project.