Chirping Burger Corporation considers an expansion project. It currently has 10 million outstanding shares trading at $30 per share. Equity has an estimated beta of 1.4. The risk-free rate is 2%, while the market risk premium is 5%. It also has 200,000 outstanding bonds with 20 years to maturity, 8% coupon rate, $1,000 par, currently trading at par. The corporate tax rate is 30%. The project will require an investment if $112 million and will produce a net after tax cash flow of $12 million per year for 20 years.

a. Should Chirping Burger accept the project?

b. Prior to the investment decision, Chirping Burger bonds were downgraded, and their price dropped to 70.122% of par. Should Chirping Burger go ahead with the expansion?