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32 NuCar is evaluating the idea of adding manufacturing equipment to their plant. Pertinent information about this capital budgeting project is highlighted below: - Over
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NuCar is evaluating the idea of adding manufacturing equipment to their plant. Pertinent information about this capital budgeting project is highlighted below: - Over the past 12 months, NuCar has spent $1,750,000 to make their manufacturing process more efficient. - The new manufacturing equipment will cost $75,600,000 fully installed. The equipment will be depreciated over 20 years to a salvage value of $0. NuCar uses straight-line depreciation. - If Nucar adds the new equipment, sales are expected to increase by $27,400,000 and costs are expected to increase by $10,000,000. - The appropriate tax rate for NuCar is 40%. - The firm's optimal capital structure is 65% equity and 35% debt. - The cost of equity is 17%, and the before-tax cost of debt is 9%. What is the weighted average cost of capital (i.e., the WACC) of this firm? 1) 12.52% 2) None of the given answers for this question are within 0.03 points of the correct answer. 3) 13.39% - The cost of equity is 17%, and the before-tax cost of debt is 9%. What is the weighted average cost of capital (i.e., the WACC) of this firm? 1) 12.52% 2) None of the given answers for this question are within 0.03 points of the correct answer. 3) 13.39% 4) 12.73% 5) 12.94% 6) 13.15% Step by Step Solution
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