****NOTE: am not looking for the answer. I am having trouble to understand the information given and how to solve. Please provide a explanation of how to approach this question a) and b) thank you kindly.*****

Sawchuk Company is considering an important capital project it will raise external capital to finance.

The firm is financed in part by equity investors and in part by rolling over $500 million par value of 10-

year annual bonds on which it pays interest totaling $30 million per year. Each bond has a face value of

$1,000. The flotation costs for a new bond issue would be 1% of the total proceeds. Over the past

decade, the firm has maintained an average compound growth rate of 4.2% in its dividends, a rate

analysts expect it can maintain. This year, each common share received a total of $3.00 worth of

dividends. These shares are trading at $50 but the net proceeds from issuing new shares would be only

$48.50 each (floatation costs are $1.50/share). Sawchuk presently has 8,000,000 common shares

outstanding. Finally, Sawchuk's investment bankers estimate that new preferred shares providing a $2

annual dividend could be issued to investors at $24 per share to 'net' Sawchuk $23/share issued (after

flotation costs). The firm already has 1,000,000 of these preferred shares outstanding. Its tax rate is

20%. Sawchuk's preferred shares are trading at $24, its bonds at $950 and common shares at $50.

1. Assuming Sawchuk does not change its exiting capital structure (weights), calculate its after-tax weighted average cost of capital (WACC)

2. Sawchuk planned to invest $50 million in the new project, what is the total amount of funds it

will need to raise?

****NOTE: am not looking for the answer. I am having trouble to understand the information given and how to solve. Please provide a explanation of how to approach this question a) and b) thank you kindly.*****