AWS $28$ plc has $****$ a market value of equity of $6$m and a market value of debt of $2\mathrm{.}5$m$.$ It pays $6\%$ for its debt financing and has a beta of equity equal to $2\mathrm{.}17.$ Suppose that the effective tax rate is $25\%,$ the expected return on the $****$ market portfolio is $15$ and the risk$-$free interest rate is $5\%.$ AWS $28$ plc is now considering investing in one of two new mutually exclusive projects $****$ P and Q$.$ Both projects P and Q have a life of $4$ years and are similar to the firms existing operations$/$

Projects $|$ Cash Outflow $()|$ Cash Inflow $()$

$|$ Year $0|$ Year $1$ Year $2$ Year $3$ Year $4$

P $|200,000|10,00040,000140,00070,000$

Q $|150,000|70,00060,000100,00080,000$

Required $($show all workings$)$:

$($a$)$ Calculate the cost of $****$ equity capital and the weighted average cost of capital $($WACC$)$ after tax of AWS $28$ plc$.$

$($b$)$ Evaluate the net present value $($NPV$)$ of projects P and Q$.$ Which project $****$ should AWS $28$ plc accept, according to the NPV method?

$($c$)$ Suppose now $****$ instead that AWS $28$ plc is all$-$equity financed, that is$,$ it has no debt in its capital structure. Assume the same beta of equity, risk$-$free interest rate and market risk premium as above. AWS $28$ plc is considering investing in the mutually $****$ exclusive projects P and Q as above.

Which project should be accepted, according $****$ to the NPV method, in this case? Assume that the projects are similar to the firm$$s existing operations.