Part 2: Quantitative Problems Problem 1: (20points) A project will produce an expected FCF of $100 million a year in perpetuity starting next year. To value it, we have identified a comparison firm. The equity beta of the comparison firm is 1.4, and the comparison firm has been maintaining a D/E ratio 1. The project's debt capacity is such that it will keep a constant D/E=0.75. The risk-free rate is 5%, and the market risk premium is 10%. The tax rate is 20%. b) (10 points) Now suppose the comparison firm has risk-free debt, but the project's debt is risky. Specifically, the beta of the debt of the project is 0.2, and the yield-to-maturity is 8%. The tax shields will be utilized fully 90% of the time. The rest of the time the tax shields will be lost (i.e., no tax shields carry forwards). Assume that the debt and the tax shields are equally risky. Calculate the WACC of the project in this scenario and find the value of the project