$3.$ A firm with a $14\%$ WACC is evaluating two projects for this year$$s capital budget. After$-$tax cash flows are as follows:

Project A $-$$$6000$ $$2,000$ $$2,000$ $$2,000$ $$2,000$ $$2,000$

Project B $-$$$18,000$ $$5,600$ $$5,600$ $$5,600$ $$5,600$ $$5,600$

a$.$ Calculate NPV$,$ IRR and payback for each project.

b$.$ If the projects are mutually exclusive, which project will you select and why?

c$.$ Is there a conflict between the NPV and the IRR rule?

d$.$ How is the WACC calculated? If we assume that the firm had the following capital structure: Equity: $55\%$ proportion cost $(20\%)$

Debt: $25\%$ proportion cost before tax of $30\%(12\%)$

Preference: $20\%$ proportion cost $(14\%)$

e$.$ What will be the firm$$s WACC? Calculate the NPV of the two projects above with the new WACC?