**This is needed no later than 8/6 5am!!!!! **

**Scenario:** You work for an investment banking firm and have been asked by management of Vestor Corporation (not real), a software development company, to calculate its weighted average cost of capital, to use in evaluating a new company investment. The firm is considering a new investment in a warehousing facility, which it believes will generate an internal rate of return of 11.5%. The market value of Vestor’s capital structure is as follows:

To finance the investment, Vestor has issued 20 year bonds with a $1,000 par value, 6% coupon rate and at a market price of $950. Preferred stock paying a $2.50 annual dividend was sold for $25 per share. Common stock of Vestor is currently selling for $50 per share and has a Beta of 1.2. The firm’s tax rate is 34%. The expected market return of the S&P 500 is 13% and the 10-Year Treasury note is currently yielding 3.5%.

**Determine** what discount rate (WACC) Vestor should use to evaluate the warehousing facility project.** And why you chose that rate **

**Assess **whether Vestor should make the warehouse investment.

**Prepare** your analysis in 400 words in Microsoft® Word.

**Use **Microsoft® Word tables in the presentation if you choose.

**Show all calculations and analysis in the presentation (if using Word (step-by-step calculations are needed; not the equation and the solution – you needs to show how they derived the final solution?). **