1. Go-Go Inc. is thinking about investing in a new project. The balance sheet reports that they currently have $22 million worth of long-term debt and $18 million worth of common equity. Their current cost of debt is 6%. According to Yahoo.Finance.com the current required return to Go-Go's stock is 11%, the company has 1.5 million shares of stock outstanding and the stock currently trades for $32 per share. If their average tax rate is 34% and they have no preferred stock, what Go-Go's weighted average cost of capital?
2. Mountain Acupuncture is thinking of opening a new location. Initial supplies will require an upfront cost of $16,000. They estimate that they can earn $2,000 the first year in business, $5,000 in year 2, and $7,000 in years 3, 4 and 5. If their cost of capital is 12%, what is the NPV of this investment?