You were hired to evaluate Miller Manufacturing's expansion project. Suppose that Miller expects the project's cash flow from operations to be $80,000 for 5 years. The project will also increase net working capital by $15,000 every year. You were also told that the firm is expected to pay a $1.5 dividend at year end (D1 = $1.5). The dividend is expected to grow at a constant rate of 7 percent a year, and the common stock currently sells for $45 a share. The before-tax cost of debt is 8 percent, and the tax rate is 35 percent. Miller's target capital structure consists of 60 percent debt and 40 percent common equity.

1. What is the yearly free cash flow on the expansion project? Show all your work.

2. What is the company's WACC? Show all your work.