Suppose that as a financial manager you have collected the following information on your company.

Financial element	Cost
Before-tax cost of debt	6.5%
Tax rate	40%
Total long term debt	$400,000
Cost of preferred stock	7.25%
Total preferred stock	$50,000
Cost of common stock	11%
Total common stock	$500,000
Finance utilized	$850,000

The firm is considering undertaking a project that costs $250,000 with an expected return of 13.5%. Not having enough existing capital, how would you recommend going about obtaining the additional funds? Use the current WACC in your analysis. Discuss how the current WACC will change based on the type of financing chosen. What would the result be if we used a firm's weighted average cost of capital for all investments?

When responding to your peers, provide a scenario that would allow the company to undertake the project and make the resulting WACC more favorable.