1. Randy's Ranch House Caf has an adjusted Weighted Average Cost of Capital (WACC) of 10.08%. The company has a capital structure consisting of 70% equity and 30% debt, a cost of equity of 12.00%, a before-tax cost of debt of 8.00%, and a tax rate of 30%. Randy is considering expanding by building a new Randys Ranch House Caf in a distant city and considers the project to be riskier than his current operation. He estimates his existing beta to be 1.0, the required return on the market portfolio to be 12.00%, the risk-free rate to be 3.00%, and the beta for the new project to be 1.40. Given this information, and assuming the cost of debt will not change if Randy undertakes the new project, what adjusted Weighted Average Cost of Capital (WACC. should be used in his decision-making?

2. Your firm has an average-risk project under consideration. You choose to fund the project in the same manner as the firm's existing capital structure. If the cost of debt is 11.00%, the cost of preferred stock is 12.00%, the cost of common stock is 17.00%, and the Weighted Average Cost of Capital (WACC) adjusted for taxes is 15.00%, what is the Internal Rate of Return (IRR) of the project, given the expected cash flows listed here? Use a financial calculator to determine your answer.

3. Takelmer Industries has a different Weighted Average Cost of Capital (WACC) for each of three types of projects. Low-risk projects have a WACC of 8.00%, average-risk projects a WACC of 10.00%, and high-risk projects a WACC of 12%. Which of the following projects do you recommend the firm accept?