Wynwood Brewing is a Miamis craft production brewery. The brewery is located in the neighborhood with the same name and brews some popular beers, like La Rubia or PoPs Porter, that are sold in its own bar within its premises, but also in local supermarkets, like Publix, and national ones, like Whole Foods. It was founder by Luis Birgnoni and his father Luis POPS Brignoni.

Luis Jr. and POPs are evaluating a new bottling machine for its brewery, they said that it will expedite the production and they will be able to recover their investment in no time. The investment has the following numbers, they also provided us with some information about their balance sheet in order to calculate the WACC.

Debt and equity costs:

Debt: 8% (after tax) and represents 60% of its balance sheet

Equity: 12% and represents the rest of its balance sheet

Investment needed to purchase the new machine: ($453,000)

Returns:

Year 1: $220,000

Year 2: $350,000 Year 3: $150,000

Year 4: $70,000

a) Calculate WACC

b) Calculate IRR, NPV and Payback period

c) Should they go ahead with the project?