National Electric Company (NEC) is considering a $45.08 million project in its power systems division. Tom Edison, the companys chief financial officer, has evaluated the project and determined that the projects unlevered cash flows will be $3.18 million per year in perpetuity. Mr. Edison has devised two possibilities for raising the initial investment: Issuing 10-year bonds or issuing common stock. NECs pretax cost of debt is 7.7 percent, and its cost of equity is 11.6 percent. The companys target debt-to-value ratio is 80 percent. The project has the same risk as NECs existing businesses, and it will support the same amount of debt. NEC is in the 34 percent tax bracket.

Calculate the weighted average cost of capital. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Weighted average cost of capital

%

Calculate the net present value of the project. (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Net present value

$

Should NEC accept the project?

	No
	Yes