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A firm with a corporate wide debt/equity ratio of 1:2, an after tax cost of debt of 7 percent, and a cost of equity capital
A firm with a corporate wide debt/equity ratio of 1:2, an after tax cost of debt of 7 percent, and a cost of equity capital of 15 percent is interested in pursuing a foreign project. The debt capacity of the project is the same as for the company as a whole, but its systematic risk is such that the required return on equity is estimated to be about 12 percent. The after tax cost of debt is expected to remain at 7 percent. a. What is the project's weighted average cost of capital? How does it compare with the parent's WACC ? b. If the project's equity beta is 1.21 , what is its unlevered beta
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