Question: Please help me to calculate the WACC :) please provide solution. Thank you range Inc. is considering adding a new line to its product mix.

 Please help me to calculate the WACC :) please provide solution. Please help me to calculate the WACC :) please provide solution. Thank you

range Inc. is considering adding a new line to its product mix. They hired you, a recent business graduate from MacEwan University, for conducting this analysis. The Research and development costs were $100,000 The new line would generate incremental sales of 1,500 units per year for 4 years at an incremental cost of $75 per unit. The price of the units would be $200 per unit in year 1. The price is expected to increase at 10% per year and the costs are expected to increase at 3% per year. The fixed costs are estimated to be $100,000 per year and would increase with inflation (2% per year). .To handle the new product line, the firm's net operating working capital would have to increase by an amount equal to 10% of new phone sales revenues. The production line would be set up in an unused space at the company's main plant. The plant space could be leased out to another firm for $25,000 per year They have to buy new machinery. The approximate cost of the machine would be $200,000, with another $10,000 in shipping and handling charges. It would also cost an additional $15,000 to install the equipment. The machinery has an economic life of 4 years and has a CCA rate of 30%. The machinery is expected to have a salvage value of $30,000 after 5 years of use. . The company has 1,000 common shares with market price of $30 per share. The company also has 100 preferred shares with market value of $25 each with $0.50 dividend per quarter. The company has $10,000 of long-term bonds trading in the market with an average of price of $1,050 and 5 years to maturity and 6% semi-annual coupon. Common shares of the firm have a beta of 1.5. The risk-free rate is 3% and the market risk premium is 5% The firm tax rate is 40%. . . The project is considered by the financial department to be as risky as the company Requirements 1. Calculate WACC

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