(1)

market real interest rate=0.5%+6%=6.5%

nominal interest rate=（1+real interest rate）*（1+Inflation rate）-1=11.825%

year 0:cash flow=-$4500

year1: cash flow=0.7*500*(20-15)=$1750

year2:cash flow=0.7*700*[(20-15)*(1+11.825%)]=$2739.7125

year3:cash flow=0.7*800*[(20-15)*(1+11.825%)^2]=$3501.353

(2)

total capital=5000000+300000*40+100000*100=$27000000

WACC=1%*(1-30%)*10000000/27000000+8%*5000000/27000000+(0.5%+1.2*6%)*300000*40/27000000=0.05162

So the weighted average cost of capital for the company is 0.05162

(3)

NPV=-4500+1750/(1+11.825%)+2739.7125/(1+11.825%)^2+3501.353/(1+11.825%)^3=1759.79

We shuold accept the project A.