The Market Wizards Group (MWG) is a publicly traded company that produces food. The company decided to expand in to the electronics industry. The new electronics project has the following net cash flows (numbers in thousands): Year 0 1 -$10,000 $3,500 2 $6,800 3 $4,200 4 $3,700 CF 5 $2,400 This project will be financed with 50% debt, 50% equity. The financing will be raised externally at time 0 by a local investment bank. The flotation cost of all sources of capital is $2 million. MWG will issue $1,000 par, 5 years, 7.5% coupon rate with semiannual payments. The bond will be sold at $875. To estimate the cost of equity, MWG research department identified a publicly traded comparable and estimated the following regression output: Coefficients Standard Errors Stat P-Value Intercept 0.00 0.005 0.00 0.15 X Variable 1 1.45 0.15 9.67 0.00 Also, the research department collected the following information regarding the comparable's capital structure and tax rate: Debt Ratio 0.6 Marginal tax rate 35% The 10-years T-notes rate is 5% and the average return on the market portfolio is 11% The marginal tax rate of MWG is 35% a) Calculate the after-tax cost of debt of the new project? Show your calculator inputs. b) Calculate the cost of common equity of the new electronics division. Show all your work. c) Calculate the WACC of the new electronics division. d) Should MWG accept the project? Show all your work