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Each problem is worth 5 marks. Problem 1. A firm has a WACC of 10% and an after-tax cost of debt of 6%. It finances
Each problem is worth 5 marks. Problem 1. A firm has a WACC of 10% and an after-tax cost of debt of 6%. It finances itself with equal amounts of debt and equity. a. It is considering an investment project that yields an estimated return on equity of 11%. The project is small and of similar risk to the firm's existing projects. Should it undertake the investment? b. Separately, it is considering an investment that yields an estimated return on equity of 14%. The project is small but is riskier than the firm's existing projects. Should it undertake the investment
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