WACC and Project appraisal With the philosophy of "continuous growth", technology giant Al Futtaim Motors has identified an opportunity of a new investment in expected completion time of 4 years. The cash flow forecasting team along with the project team estimated the following cash flows und situations. Year 0 1 2 3 4 CF Good ($2,750) $725 $725 $800 $1,400 CF Bad ($1,100) $550 $600 $100 $100 Al Futtaim Motors is currently an all-equity firm. It has two million shares outstanding, selling for $43 per share. The company has a beta o rate at 3% and the market premium at 8%. The tax rate is 35% for the company. The company has now plans for further expansion in other m restructuring through raising debt. The board of directors in consultation with the finance team has come up with the proposal to sell $43 mil stock. The bonds will have a yield to maturity (coupon rate) of 9%. With the addition of new debt, the beta of the company would rise to 1.3 Questions for discussions 1. Should the company go ahead with the project? 2. If at all, the board decides to go ahead with the project, should it fund its project the way its finance team suggested? 3. What can be the effect of the capital restructuring on the value of the firm? 4. What would be the impact of the project on the firm's dividend decisions