2YZ Technologies is considering a major expansion program that has been proposed by the company's information technology group. Before proceeding with the expansion, the company must estimate its cost of capital. You have been tasked with doing the estimation The following data has been provided to you.

1. The firm's tax rate is 25%.

2. For the bond: a) The current price is $1,153.72. b) The coupon rate is 12% with semiannual payment. c) The years to maturity is 15 years. d) New bonds would be privately placed with no flotation cost.

3. For preferred stock: a) The current price is $111.10 with a quarterly dividend b) The dividend rate is 10%. The par value is $100.

4. For common stock: a) The current price is $50 per share. b) The next dividend (D1) is expected to be $4.40. Dividends are expected to grow at a constant annual rate of 5% in the foreseeable future. Ignore flotation costs. The company's beta is 1.2. The yield on T-bonds is 7%. The market risk premium is 4%

5. 2YZ target capital structure is 30% debt, 10% preferred stock, and 60% common equity.

1. Conduct a quick sensitivity analysis on the model you used to answer the previous questions. For the sensitivity analysis change (by either increasing or decreasing) the value of one of the factors which affects WACC. Describe what you changed and describe its impact on WACC. Also, hypothesize on what economic/political factors could drive such a change.

2. If the WACC changes as you stated in the previous case, how would IRR and NPV be impacted.