Tim works for HydroTech, a manufacturer of high$-$pressure industrial water pumps. He reports directly to the CFO, and she has asked him to calculate HydroTech's WACC. He has gathered the following information about HydroTech: its market capitalization $($its market value of equity$)$ is $$130$ million, its beta is $1\mathrm{.}2,$ the total book value of its debt is $$40$ million, it has $$20$ million cash, and its cost of debt $($using the quoted yields on HydroTech's outstanding bond issues$)$ is $4\%.$ In addition, the yield of the $10-$year government bond $($the risk$-$free rate$)$ is $2\%,$ the market risk premium is $4\%,$ and the marginal corporate tax rate is $35\%.$ Calculate HydroTech's WACC. When is it appropriate to use this WACC to evaluate a new project?

Calculate HydroTech's WACC.

WACC $=\%$

$($Round to two decimal places.$)$

When is it appropriate to use this WACC to evaluate a new project?

A$.$ HydroTech should use this WACC to evaluate projects that are average risk and will be financed in the same ways as HydroTech is financed.

B$.$ HydroTech should use this WACC to evaluate projects that are above average risk and have a larger book value of debt value than HydroTech.

C$.$ HydroTech should use this WACC to evaluate projects that are below average risk and have a smaller cost of debt rate than HydroTech.

D$.$ HydroTech should use this WACC to evaluate projects that are average risk and have a smaller beta value than HydroTech.