You're a consultant hired by a small company that installs GPS units in semi trucks and school buses. the company is considering investing in a project to manufacture the units themselves (instead of purchasing the new units). they've used their weighted average cost of capital (WACC) of 15 percent to determine that the project has a positive NPV of $3,000.

The CFO and CEO dont agree. the CEO doesnt believe that the WACC is the correct number because the project is risky: its a brand-new venture. The CFO argues that the WACC alread incorporates risk, and the cost of new funds at the source (debt and equity financing) is the only thing that matters.

A. what is WACC? whats the formula?who is correct? why?

B. WHat are two different approaches to determine an appropriate cost of capital that appriately accounts for the different risk? Walk us through the steps in how youwould you proceed. (keep in mind theres more than one correct answer) then identify an advantage and disadvantage of each of these approaches. Lastly, how would you determine if this project should be accepted or erejected ? (no actual computations are needed)