Victory Brewing Company is in the process of building a new brewery and a brewpub in California to meet demand for their beer on the west coast. They need to raise $40 million to build it. Of the $40 million, they intend to raise $10 million as a bank loan and the rest by issuing common stock. There is no preferred stock. Beneficial Bank has offered to lend them $10 million at an interest rate of 6 percent. Further, their cost of equity is 10%.

a. If their tax rate is 21%, what is their weighted average cost of capital?

b. If the IRR on the project is 15%, should the project be implemented?