Suppose you have the following information about the firm:

Kendama Industries is considering a new project and they need an estimate of WACC to perform

the valuation using the IRR method. This is what is known about the company:

Current stock price is $$65.$ The firm's beta is $1\mathrm{.}4.$ Current risk$-$free rate is $4\%$ and the expected

return on the market is $11\%.$ The latest dividend is $$1\mathrm{.}10.$ The firm's expected growth rate is $3\%.$

There are $100,000$ stocks outstanding. $($Hint: use your best estimate of the cost of equity for WACC

estimation, that is$,$ find the average of the two models$).$

The firm also has some debt outstanding with par value of $$1,000.$ Current quote is $115.$ The bonds

pay $8\%$ coupons semiannually and there are $20,000$ bonds outstanding. The bonds mature in $25$

years. The firm's tax rate is $21\%.$

Finally, the firm has $10,000$ preferred stocks outstanding with the price of $$13$ each and a dividend

of $$1\mathrm{.}15.$

The new project will be less risky than the average project of the firm.