Mosaic Software could invest $10,000,000 over a 6-year period with a net cash flow estimate of $1,115,000 per year. The equity portion of the investment will cost 9.25% per year; however, the debt portion can vary from 20% to 80% of the total amount, and the required loan rate may change with increasing amounts of debt financing. After an important meeting with the loan officers of the two prime lending banks, the CFO of Mosaic formulated scenarios Bank 1 and Bank 2 for funding the project with different D-E mixes. Develop the WACC curves using a spreadsheet for each scenario and determine if the project is economically justified based on equity financing provided the MARR is set equal to the WACC (a) for the D-E mix of 50%50%, and (b) for each funding scenario.

Cost of Debt Capital, % Project Bank 2 7.5 % 7.5% 8.0% 8.0% 8.5% 9.0% 9.5% Bank 1 D-E mix 20-80 30-70 40-60 50-50 60-40 70-30 80-20 8% 8% 8% 8% 8% 8% 8%