Preferred w/ Excel (with formulas shown, if possible)

Red Rock, Inc., a private firm in food industry, is considering a new project. The company currently has a target debtequity ratio of .45, but the industry target debtequity ratio is .40. The industry average beta is 1.70. The market risk premium is 6 percent, and the risk-free rate is 4 percent. Assume all companies in this industry can issue debt at the risk-free rate. The corporate tax rate is 35 percent. - The project requires an initial outlay of $692,000 and is expected to result in a $112,000 cash inflow at the end of the first year. The project will be financed at the companys target debtequity ratio. Annual cash flows from the project will grow at a constant rate of 4 percent until the end of the fifth year and remain constant forever thereafter.

1. What is appropriate discount rate for this project?

2. Calculate the NPV of the project.

THANK YOU