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Q18). The Rare Find Co. has the following information: Debt outstanding: $280 million Before-tax cost of...

Q18).

The Rare Find Co. has the following information:

Debt outstanding: $280 million

Before-tax cost of debt: 5%

Market cap: $650 million

Cost of common stock: 11%

Tax rate: 21%

Rare Find is evaluating a project with the following information:

Over the next five years EBIT will equal: 12 million, 13 million, 14 million, 15 million, 16 million respectively.  

An investment of $5 million is required in net working capital at the beginning of the project, which will be recovered at the end of the project.

The cost of the equipment will be $30 million depreciated using straight-line to zero over the project's life, with no salvage value.

The project requires an additional 1% risk premium above the firms WACC.

Calculate the WACC for the firm. (Enter percentages as decimals and round to 4 decimals)

Calculate the operating cash flows for the first year of the project.

Calculate the net present value for the project. (Round to 2 decimals)

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