11. You are evaluating a project that will cost $6.61 million. You got the results from your finance department that your firm’s Debt to Equity ratio is 0.45, the 15-year bond, which is the only long term debt has a yield to maturity of 11.45% You also have the market information as follows: risk free rate is 1.22%, tax rate is 40%, and market risk premium is 12.36%. In order to estimate your firm’s systematic risk, you run a regression on your company stock return (dependent variable) and S&P 500 index return (independent variable). And the regression result is attached. The project will generate after-tax cash flows of $2.88 million per year for 3 years and then it will be terminated. If the flotation cost for equity is 5.52% and the flotation cost for debt is 3.43%. Expected return of equity should be____(a)____%. WACC should be____(b)____%. True cost is $_____(c)____million. Net Present Value should be $___(d)_____million.

*Regression Statistics*Multiple R0.82R Square0.69Adjusted R Square0.68Standard Error4.65Observations59ANOVA*df**SS**MS**F*Regression1796.430538796.43053836.82379Residual571232.80471621.62815292Total582029.235254*Coefficients**Standard Error**t Stat**P-value*Intercept0.080.650.130.89S&P 500 Return1.320.226.061.11E-07