Metaverse, Inc. is an information sharing company that is trying hard to control all aspects of our lives. It has no debt and its stock trades on the NYSE with an (equity) beta of 2.00. Metaverse, Inc. is considering investing in electronic hardware business, starting with all home networks. Their first business project will require an initial investment of $100 Billion. If undertaken, the network project will represent 20% of Metaverse's assets. There is a 40% chance the network project will generate an annual payoff of $25 Billion forever, and a 60% chance that the project will fail and generate no cash flows. Companies solely in the networking business have an equity beta of 1.50. These firms have a debt/equity ratio of 0.50, on average, and have debt with a yield of 6%. Metaverse, Inc. is forecasting that the average market risk premium is about 5% and the risk-free rate on a long-term bond is 2.5%. 1. What is Metaverses cost of capital before undertaking the network project? 2. What is the IRR of the new project? 3. Should Metaverse, Inc. take the new project? 4. What is the cost of capital (hurdle rate) of the network project? 5. Should Metaverse, Inc., accept the new project? 6. If Metaverse, Inc., has 1 billion shares, what will happen to its stock price? 7. What is Metaverse, Inc.s new cost of capital? Is this good or bad news?