1) To estimate the company's WACC, Marshall Inc

1) To estimate the company's WACC, Marshall Inc. recently hired you as a consultant. You have obtained the following information. (1) The firm's noncallable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $1,050.00. (2) The company's tax rate is 25%. (3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stock's beta is 1.20. (4) The target capital structure consists of 35% debt and the balance is common equity. The firm uses the CAPM to estimate the cost of common stock, and it does not expect to issue any new shares. What is its WACC?

2) Quincy Enterprises is considering investing in two projects. The first is expected to cost $50 million and will result in cash flows of $60 million, $90 million, and $20 million at the end of the first, second, and third year. The second project which is expected to cost $80 million, and will result in cash flows of $20 million at the end of the first, 0 at second year, but expected to gain economic benefits of $250 million on year three. What is the crossover rate?