Eastern Digital is planning on expanding its operations. Its initial outlay would be $12m. The project would generate $2m per year over the next 10 years (starting at the beginning of next year). Is this project worthwhile?

Eastern Digital has 300,000 shares outstanding which sell for $10 per share. The extra risk associated with this stock suggests that the investor should get a return 5% greater than that being paid on its bonds. The company has 10,000 10year bonds outstanding. The bonds have a coupon rate of 8% (coupons paid semiannually), a face value of $1,000 and currently sell for $1,100. The marginal tax rate for this company is 30%. What is this companys WACC? 4.