Question $1$ Cost of Capital and Project Evaluation $(50$ marks$)$EquipMed is one of the largest medical equipment manufacturers in Australasia with facilities across Australia and New Zealand. As part of EquipMeds journey towards becoming more sustainable it is embarking on a megaproject with the aim of facilitating research into sustainable sourcing of raw materials and developing medical equipment that is environmentally friendly. The investment is expected to cost $$45$ million. The estimated life of the project is $8$ years after which time the salvage value is expected to be $$10$ million. The company uses the diminishing balance method of depreciation at $20\%$ per annum. EquipMed has set a payback period of $7$ years for the project. Market data for EquipMed is as follows:Coupon Bonds:$$20,000,000,4\mathrm{.}75\%$ coupon bonds outstanding with $25$ years to maturity redeemable at a par value of $$1000.$ The coupon bond is selling at $95\%$ of par; The bond makes semi$-$annual paymentsZero$-$Coupon Bonds:$$10,000,000$; $15$ years to maturity and redeemable at a par value of $$1000.$ The zero$-$coupon bonds are selling at $24\mathrm{.}5\%$ of par.Equity:$1,000,000$ ordinary shares, selling for $$30$ per shareNon$-$redeemable preference shares:$1,000,000$ shares $($par value $$20$ per share$)$ with $4\mathrm{.}25\%$ dividends $($after taxes$),$ selling for $$15$ per share. Additional Information: The companys tax rate is $28\%.$ The project requires a further $$6$ million in initial net working capital and $$10$ million in fixed assets. Dividend information for the past $6$ years is as follows with dividends growing at the same rate year$-$on$-$year for the foreseeable future:Year $(-6)$ $Year $(-5)$ $Year $(-4)$ $Year $(-3)$ $Year $(-2)$ $Year $(-1)$ $Year $(-0)$ $$0\mathrm{.}6360\mathrm{.}6630\mathrm{.}6910\mathrm{.}720\mathrm{.}7490\mathrm{.}7790\mathrm{.}810$ The company estimates that the investment will generate revenue of $$10$ million and $$14$ million in the first $2$ years. This is followed by revenue of $$22$ million in Year $3,$ and the revenue will increase by $5\%$ per year thereafter until Year $8.$ The variable costs are estimated at $40\%$ for the first two years and will increase to $45\%$ in the thereafter till Year $8.$ The project will incur $$1\mathrm{.}5$ million per annum in fixed costs $($fixed costs include coupon payments to bondholders$)$ Required:$1.$ Compute the Weighted Average Cost of Capital $($WACC$)$ of EquipMed. Show all you workings.$(16$ marks$)2.$ Recommend whether EquipMed should proceed with this project. Justify you explanation by explaining why or why not.Note: To make a recommendation use the following methodsa. Net Present Value $($NPV$)$b$.$ Internal Rate of Return $($IRR$)$c$.$ Profitability Index $($PI$)$d$.$ Payback Periode. Discounted Payback Period$(30$ marks$)3.$ What nonfinancial factors should EquipMed consider in making this decision?