Question
DataMaApp has become a very successful company consistently looking to expand via acquisitions and expansion projects. DataMaApp needs to establish an acceptable return on its
DataMaApp has become a very successful company consistently looking to expand via acquisitions and expansion projects. DataMaApp needs to establish an acceptable return on its capital investments. The common stock of DataMaApp Inc. has a beta of 0.8 , the Treasury bill rate is 4% and the market risk premium is estimated at 7%. DataMaApps capital structure is 30% debt paying a 5% interest rate, and 70% equity. What is DataMaApps cost of equity capital (from CAPM) and its WACC? DataMaApps tax rate is 35%. One project in particular DataMaApp is evaluating has an internal rate of return of 12%. Should it accept the project? Why or why not? .The project will generate a cash flow of $100,000 per year for 7 years. What is the most DataMaApp would be willing to pay to initiate the project?
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