North Sea Oil has compiled the following data relative to current costs of its basic sources of external capital, long-term debt, preferred stock, and common stock equity. Source of Capital Long-Term Debt Preferred Stock Common Stock and Retained Earnings Cost 7% 19% 20% Below are the company's target capital structure proportions used in calculating the weighted average cost of capital Source of Capital Long Term Debt Preferred Stock Common Stock and Retained Earnings Target Capital Structure .25 .25 .50 North Sea Oil has the opportunity to invest in the following projects: Project A $130,000 Project B $85,000 Initial Investment Year Cash Inflows $25,000 $35,000 $45,000 $50,000 $55,000 Cash Inflows $40,000 $35,000 $30,000 $10,000 $5,000 2 4 Using WACC to calculate the NPV and evaluate the IRR, which project should be implemented? (You may also wish to include Payback to further support your answer) Assuming the project(s) is implemented using equity financing, the capital structure changes to: Source of Capital Long Term Debt Preferred Stock Common Stock and Retained Earnin New Capital Structure after project implementation .20 20 .60 Calculate the New WACC and briefly discuss in your report if this new WACC and capital structure might signal the market and investors