Mini Case: Techlink Technology Inc. Corporation's Capital Structure and Investment DecisionBackground:Techlink Technology Inc. is a technology hardware company based in British Columbia (BC), specializing in wireless communication technology, particularly fast fibre cable. The company is considering expanding its product line, necessitating a significant investment in research and new manufacturing facilities. The CEO and CFO must provide recommendations to the board regarding the feasibility of this investment project. Capital Structure Analysis:Techlink's capital structure currently comprises 60% equity and 40% debt. The company is contemplating increasing its debt-to-equity ratio to 65% debt and 35% equity, believing that this adjustment could reduce the overall cost of capital. Techlink has a beta of 1.2. Its 10-year bond trades at $985 with a 6% semi-annual coupon rate. Additional Information:Corporate tax rate: 30%Market premium: 10%Risk-free return rate: 4% Investment Projects:The proposed project involves finalizing research and development (R&D) and expanding production capacity for a new product line. The estimated cash flows for the project are as follows:
Year Cashflow
0 $300,000,000
1 $63,000,000
2 $65,000,000
3 $50,000,000
4 $105,000,000
5 $105,000,000
6 $50,000,000
7 $50,000,000
8 $52,000,000 Questions:Calculate the company's new Weighted Average Cost of Capital (WACC) if it changes its capital structure to 65% debt and 35% equity. Calculate the Net Present Value (NPV), Internal Rate of Return (IRR), Cash Payback Period, Profitability Index, and Discounted Cash Payback for the project using the new WACC. Provide a rationale for your investment recommendation.