Suppose Mansal Corp, a producer of furniture, has common equity worth $20 million, preferred equity worth $5 million, and debt worth $15 million (all at market values). Mansal's equity beta is 2, the risk-free rate is 5%, and the expected return on the

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stock market index is 15%. The annual yield to maturity on its existing debt is 8%. Preferred shares a currently priced at $5 each and the firm is expected to pay a constant dividend of $0.5 per share to preferred shareholders. The firm is considering a new project which is within its main line of business. It plans to finance the project with debt and equity in the same proportions it currently has in its capital structure. The project will generate a free cash flow of $10 million in the first year and the free cash flow will grow 2% per year starting in year 2 and forever. The up-front cost of the project is $50 million. The firm pays taxes at a 40% rate. What is the project's WACC and what is the NPV of the project?