Rogers Corporation pays taxation at a rate of 30% and is currently evaluating an expansion of its existing product lines that is expected to generate incremental after-tax cash inflows of $5.3 million per year forever. The current up-front cost of the expansion will be $40 million. At its target debt-to-equity ratio of 0.6 it can raise debt funds via a Bond issue with bondholders requiring a rate of return of 10% with the balance comprising new shares with shareholders require a rate of return of 18%. Flotation costs for the bond finance component would be 5% and 11% for the companys new equity.

(a) Calculate the total amount of finance required by the Rogers Corporation to fund the project to expand its existing product lines.

(b) What is the companys after-tax weighted average cost of capital? (c) Should the company undertake the project?