CoCo Inc. is a conglomerate firm in the United States. Its business covers many industries, such as retail, financial services, technical products, and industrial. To better understand the companys financial situation and make the future financial plans, the CEO, Mr. Richard Cookson wants to know CoCo Inc.s WACC. Currently, CoCo Inc. has 20 million shares of common stocks outstanding, 5 million shares of preferred stocks outstanding, and 500,000 perpetual corporate bonds outstanding. The common stock has a book value of $10 per share and currently is selling for $30 per share. The common stocks total risk is twice as much as the market portfolio and its systematic risk is 1.5 times the market portfolio. The preferred stock pays a $3.8 annual dividend and is currently selling for $25 per share and the total book value of the preferred stock $120 million. It has a 10-year maturity and we expect to do another issue of preferred stock to replace the current issue at that time to maintain its capital structure. In addition, CoCo Inc. has borrowed a variable rate loan from HBSC using its current plant as collateral, where the loan value is $75 million and the current interest rate is 8% per year (EAR). The corporate bond offers 10% coupon and each bond has $1,000 face value. The bond is selling at $800 now. The three-month Treasury bills are yielding 5% per year, and the market risk premium is 10 percent. The tax rate is 35 percent. a. What is the CoCo Inc.s cost of common stock, cost of debt and cost of preferred stocks. b. What is CoCo Inc.s WACC? After calculating the WACC, the CEO, the Mr. Cookson, is considering mutual exclusively projects: project X and Y. The project X is operating in the retail industry, the project Y is operating in the financial services. The project X requires initial investment $1.2 million, and will generate cash flow $ 0.72 million in next two years. The project Y require initial investment $2 million and will generate cash $0.8 million in the next three years. Meanwhile, the project Xs beta is 0.5 and project Ys beta is 0.3. The detailed information about these two projects is summarized as follows.

Year	Cash Flow (X)	Cash Flow (Y)
0	- $1.2 million	- $ 2 million
1	$ 0.72 million	$ 0.8 million
2	$ 0.72 million	$ 0.8 million
3		$ 0.8 million

c. What are the IRRs for the Project X and Y? d. Given this project information and your result of the firms WACC in part (b), what are the NPVs for the Project X and Y? e. Given your calculation, which project should be accepted and which project should be rejected and why? (Must provide explanation to get any point.)