Answer Happy

Glitter Inc. uses 30 percent common stock and 70 percent debt to finance their operations. The after-tax cost of debt is 5 percent and the cost of equity is 13 percent. The management of Glitter Inc. is considering an expansion project that costs $1.2 million. The project will produce a cash inflow of $55,000 in the first year and 120,000 in each of the following 10 years (i.e., $120,000 in years 2 through 11). What is the WACC and should Glitter Inc. invest in this project? O 8.5 percent, do not invest in project 8.5 percent, yes invest in project 10 percent, do not invest in project O 7.4 percent, yes invest in project O 7.4 percent, no do not invest in project