Sunshine Smoothies Company (SSC) manufactures and distributes smoothies. SSC is considering the development of a new line of high-protein energy smoothies. SSC's CFO has collected the following information regarding the proposed project, which is expected to last 10 years:

The project can be operated at the company's Charleston plant, which is currently vacant.

The product development team has spent $450,000 over four years developing this line of high-protein energy smoothies.

The project will require that the company spend $6.25 million today (t = 0) to purchase additional equipment. This equipment is depreciated a accelerated depreciation schedule at the rate of 20% in year 1, 25% in year 2, 15% in year 3, 10% for each of the following four years. The company plans to use the equipment for all 10 years of the project. At t = 10 (which is the project's last year of operation), the equipment is expected to be sold for $1,025,000 before taxes.

The project will require an increase in net operating working capital of $850,000 at t = 0. This working capital will be partially funded by Accounts Payable of $350,000. Accounts Receivable will be $250,000 starting in year 3 and will continue to increase by 10% a year until the end of the project.

Expected high-protein energy smoothie sales are as follows: Year 1 $1,500,000 Year 2 $2,250,000 Year 3 $3,750,000 Years 4-8 +15%

The project's annual operating costs (excluding depreciation) are expected to be 60% of sales in year one and decline ratably to 45% of sales in Year 3 and again ratably until 35% of sales in Year 5 until the end of the project.

The company's tax rate is 25%.

The following table gives SSCs earnings per share for the last 10 years. The common stock, 8.1 million shares outstanding, is now (1/1/22) selling for $63.00 per share. The expected dividend at the end of the current year (12/31/22) is 40% of the 2021 EPS. Because investors expect past trends to continue, g may be based on the historical earnings growth rate. (Note that 9 years of growth are reflected in the 10 years of data.)

Year EPS Year EPS

2012 $3.90 2017 $5.73 2013 4.21 2018 6.19 2014 4.55 2019 6.68 2015 4.91 2020 7.22 2016 5.31 2021 7.80

The current interest rate on new debt is 12%; SSCs marginal tax rate is 25%; and its target capital structure is 35% debt and 65% equity. Calculate SSCs after-tax cost of debt. Round your answer to two decimal places.

Calculate SSC's cost of common equity.

Find SSC's WACC. Do not round intermediate calculations. Round your answer to two decimal places.

Find the NPV, Payback Period, IRR & MIRR for the project.

Run two new scenarios on this project

o Scenario A: Operating performance only improves to 45% and stays flat at that rate until the end of the project. This is 30% likely to happen

o Scenario B: SSCs production facility has been recently changed to an empowerment zone, making them eligible for a reduced federal tax obligation. Their new tax rate is 20%. There is a 20% likelihood of this happening. o Assume there is a 50% chance of the original scenario occurring.

With these new scenarios, what is the adjusted rate of return on the project and what is the risk and coefficient of variation?