You are considering starting a company that manufactures motorcycles. You are planning on financing your firm 40% equity and 60% debt. You estimate that your upfront costs will be $5M, and that you will earn an EBIT of $1M per year for the next 12 years.

Ian's Finest motorcycles make motorcycles similar to the ones that you wish to manufacture. They have a CAPM equity beta of 1.9 and a debt to equity ratio of 0.7. The tax rate for both firms is 35%, the riskless rate is 3%, and the expected return on the S&P500 is 15%. Your cost of debt is 6%.

A). What is the asset beta of Ian's Finest motorcycles?

B). What is your unlevered cost of equity?

C). What is your firms equity beta?

D). What is your firms weighted average cost of capital?

E). What is the NPV of your proposed motorcycle company using the WACC method?