Prairie Steel Fabricators needs new equipment in order to provide better service to the company's customers. The cost of the equipment is $5,275,000. It is estimated that the company will save $1,125,000 annually (after tax) for the next 6 years by doing this. The firm is financed with 45% debt and 55% equity, based on market values. The firm's cost of equity is 11% and its pre-tax cost of debt is 4.5%. The flotation costs of debt and equity are 3% and 5%, respectively. Assume the firm's tax rate is 32%.

a. What is the firm's WACC? b. Ignoring flotation costs and using your answer from part (a) as the discount rate, what is the NPV of the proposed project?

c. Calculate the weighted average flotation cost, fA, for the firm. d. Calculate the dollar flotation cost of the proposed financing.

e. Including flotation costs, calculate the NPV of the proposed project.