Pierre Corporation (PC) is considering a project that is vital for the success of the company this coming year. The project requires $887,000,000 financing. The general manager of the company has asked Dr. Jack Mourinho to estimate the cost of capital for this project to calculate the project's NPV.This project is as risky as other projects, which are under consideration by the firm now. Dr. Jack Mourinho - with consultation of his assistant, Ms. Paola Guardiola, is planning to issue new 20-year bonds at par value of $1,000 with a coupon rate of 8%, which can be sold for $1,110 in bond market. Dr. Jack Mourinho is also planning to issue new preferred stocks with $2.50 dividend per share/year and $1 flotation cost per share. The preferred stock can be sold at $28 per share. The common stock of PC is currently selling for $22.00 a share. PC paid a dividend of $1.50 per share last year. Dr. Jack Mourinho and Ms. Paola Guardiola anticipate that common stock dividends will grow a constant rate of 6% per year in future. PC's' tax Rate is 35%.

Dr. Jack Mourinho suggests the following capital structure:

Common Stock $462,000,000

Debt (bonds) $412,100,000

Preferred Stock $12,900,000

Total $887,000,000

and Ms. Paola Guardiola suggests the following capital structure:

Common Stock $299,000,000

Debt (bonds) $575,100,000

Preferred Stock $12,900,000

Total $887,000,000

a)What is the project's WACC under Dr. Jack Mourinho 's suggestion? You need to show your calculations step by step.

b)What is the project's WACC under Ms. Paola Guardiola's suggestion? You need to show your calculation step by step.

c)Make a comment on these suggestions. What is effect of these two suggestions on ROE of PC. Which one you prefer and why? Please explain clearly.