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A firm can get $1,000,000 in exchange of 25% of its equity

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A firm can get $1,000,000 in exchange of 25% of its equity. After investing the amount raised in the firm, the firm expects to generate $300,000 in FCF next year which is expected to grow at 3% in perpetuity after that.

a)Calculate the cost of capital to the firm.

b)How does this cost relate to the WACC of the firm? (Assume that the firm has no debt and that its debt capacity is zero.)

Before closing the deal, Mr. Wonderful approaches the firm and argues that he is willing to provide the $1,000,000 but since he is "smart capital" he requests 40% of the equity of the firm.

c)Calculate the cost of Mr. Wonderful capital for the firm if he does not intervene in the firm's operations (i.e., assuming that the firm's cash flows are as described above). How is this cost of capital related to the WACC of the firm?

d)Suppose now that Mr. Wonderful affects the firm's cash flows, i.e., he can accelerate firm's growth to 5% for the first 5 years. After that, the firm's cash flow will grow at 3% in perpetuity. Calculate the cost of Mr. Wonderful capital to the firm. How does this cost relate to the WACC of the firm?

e)Is Mr. Wonderful a desirable source of funds for the owners of the firm?

f) Suppose that Mr. Wonderful is able to make the firm grow at k% rather than 3% for the first five years. Find the rate of growth that would leave the firm indifferent between bringing Mr. Wonderful as a source ofcapital to the firm.