In 2017, EGP Inc. had sales of $1,000,000, cost of goods sold of $750,000, salaries of $150,000, rent of $50,000, depreciation of $100,000, and a tax rate of 20%. It has $250,000 outstanding in a bank loan with an interest rate of 8%. It spent $20,000 on new equipment, and its accounts receivable increased by $5,000 from 2016. (Other current assets and current liabilities remained the same as in 2016.)

1. Calculate the free cash flow of EGP Inc. in 2017.

2. If equity investors supplied $200,000 in capital and require a 12% return, what is the company’s weighted average cost of capital (WACC)?