Problem 1 Pesca Company (PC) is considering a project vital for the company's success this coming year. The project requires $887,000,000 in financing. The company's general manager has asked Mr. Alberto Pomodoro to estimate the cost of capital for this project to calculate the project's NPV. This project is as risky as other projects that the firm is considering now. Mr. Alberto Pomodoro - with the consultation of his assistant, Ms. Caria Susina, is planning to issue new 20-year bonds at a par value of $1,000 with a coupon rate of 8%, which can be sold for $1,110 in the bond market. Mr. Alberto Pomodoro also plans to issue new preferred stocks with a $2.50 dividend per share/year and a $1 flotation cost per share. The preferred stock can be sold at $28 per share. The common stock of PC is currently selling for $22.00 a share. PC paid a dividend of $1.50 per share last year. Mr. Alberto Pomodoro and Ms. Caria Susina anticipate that common stock dividends will grow at a constant rate of 6% per year in future. PC's' Tax Rate is 24%.

Pesca Company (PC) is considering a project vital for the company's success this coming year. The project requires $887,000,000 in financing. The company's general manager has asked Mr. Alberto Pomodoro to estimate the cost of capital for this project to calculate the project's NPV. This project is as risky as other projects that the firm is considering now. Mr. Alberto Pomodoro - with the consultation of his assistant, Ms. Caria Susina, is planning to issue new 20 -year bonds at a par value of $1,000 with a coupon rate of 8%, which can be sold for $1,110 in the bond market. Mr. Alberto Pomodoro also plans to issue new preferred stocks with a $2.50 dividend per share/year and a $1 flotation cost per share. The preferred stock can be sold at $28 per share. The common stock of PC is currently selling for $22.00 a share. PC paid a dividend of $1.50 per share last year. Mr. Alberto Pomodoro and Ms. Caria Susina anticipate that common stock dividends will grow at a constant rate of 6% per year in future. PC's' Tax Rate is 24%. Mr. Alberto Pomodoro suggests the following capital structure: and Ms. Caria Susina suggests the following capital structure: 1. What is the project's WACC under Mr. Alberto Pomodoro's suggestion? You must show your calculations step by step. 2. What is the project's WACC under Ms. Caria Susina's suggestion? You must show your calculation step by step. 3. Make a comment on these suggestions. Which one do you prefer and why? Please explain clearly