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Apparently, the correct answer is WACC of .10035 but I'm unsure of how to get it Sundoes, a chain of coffee shops, would like to
Apparently, the correct answer is WACC of .10035 but I'm unsure of how to get it
Sundoes, a chain of coffee shops, would like to diversify its business operations by branching out into the copy shop business. The proposed investment is to open ten copy shops. You are tasked with calculating the appropriate hurdle rate (project-specific WACC) for the project. The financial staff at Sundoes has gathered the following information: a) Sundoes is in the 34% tax bracket and has a debt-to-capital ratio of 35%. b) The proposed investment in the copy shop business will be financed with 25% debt and 75% equity. c) The market risk premium is 8% and the risk-free rate of interest is expected to rernain constant at 5.5%, Sundoes' cost of debt is 7%. d) The two closest "pure plays" in the copy shop business have the following financial characteristics. Be DIE Kinks 1.10 1.13 0.30 a 6 142 0.65 Zippy's 1.25 1.27 0.35 6847 PACU) Aug, PA C 2Step by Step Solution
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