Microelectronics Corporation is currently at its target debt-equity ratio of 0.5: 1. It is considering a proposal to expand capacity which is expected to cost Rs.500 million and generate aftertax cash flows of Rs.130 million per year for the next eight years. The tax rate for the firm is 30 percent. Mahesh, the CFO of the company, has considered two financing options: (i) Issue of equity stock. The required return on the company's new equity is 20 percent and the issuance cost will be 12 percent, (ii) Issue of debentures at a yield of 13 percent. The issuance cost will be 3 percent.

(a) What is the WACC for Microelectronics?

(b) What is Microelectronic's weighted average floatation cost? (

c) What is the NPV of the proposal after taking into account the floatation costs?