Your firm, Golden Corp, is planning to invest in a new project. Golden has 40 million shares outstanding with a share price of $8. It also has $120 million in debt and $25 million in cash. Golden's equity beta is 1.2. The risk-free rate is 4% and the market risk premium is 5.5%. The yield to maturity of Golden's debt is 5%. The corporate tax rate is 25%. Suppose that you only focus on the risk of firms' underlying business operations. (a) Estimate Golden's weighted average cost of capital under each of the following assumptions: (i) Golden's debt beta is zero. (ii) Golden will never default on its debt. Explain the difference between your answers in (i) and (ii). (8 marks) For parts (b) and (c) below, assume that Golden's default risk is zero. (b) The free cash flows generated by the new project are as follows: Year 0 1 2 3 Free cash flows (in $ million) (200) 100 80 150 What is the NPV of this project using the WACC method? What assumption(s) do you make when implementing this method? (4 marks) (c) Suppose that to fund this new project, you have borrowed a $150 million loan with the principal to be paid in three equal installments at the end of each year. The free cash flows of the new project are the same as in part (b). What is the levered value of your project? The initial cost of the project does not need to be considered in your calculations. (10 marks)