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QUESTION 6 JG Inc. a trucking company is considering expanding its production capacity. The expansion...

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QUESTION 6 JG Inc. a trucking company is considering expanding its production capacity. The expansion costs $10 million total investment today, which is expected to generate $1.2 million additional cash flows per year in the subsequent ten years (from year 1 to year 10). The company is currently a public traded company, with 5 million shares outstanding and current stock price of $32. Based on the past 5-year observations stock return and market return, its stock beta is estimated to be 1.2. The current risk-free rate is 2% and market return is expected to be 12%. In addition to equity, the company also have 10-year-to-maturity bond of $120 million in market value. The market Yield-to-Maturity of this bond is 6%. Assume the tax rate of 3096. a. (10 pt) What is the WACC? b. (10 pt) Should the company take this expansion opportunity based on NPV rule

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