Walton Group is considering a project to start manufacturing cars for Bangladesh market. The project requires an initial investment of 10 million and has a 5 years life. The yearly cash flows are given in the picture. To fund this project, Walton will raise 40% of capital issuing bonds and the rest of the capital will be coming from issuing new common stocks. Walton will issue bonds with 10% coupon, having 15 years maturity. To sell the issue, an average discount of $20 per bond needs to be offered. There is an associated flotation cost of 3% of the par value. The company paid $2.25 common stock dividend last year. The company's policy is to allow its dividend to grow at 5 percent per year indefinitely. The stocks are currently selling in market for $50. But to attract investors, underwriter suggested an underpricing of $3 with underwriter's fee of $2 per share. Walton is in 35% tax bracket.

A. Calculate Weighted Average cost of capital for Walton Group. B. Decide if the project is feasible to take with respect to Net Present Value and Payback Period capital budgeting techniques. [Assume the acceptable payback period is 4 years and the project is independent]

Year 1 Year 2 Year 3 Year 4 Year 5 Cash flows 1.600.000 2.800.000 2.250,000 3,000,000 2.700.000