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Firm AAA is financed with (market values) 200 debt and 300 equity. Cost of debt is 6%, cost of equity is 12%. The corporate tax
Firm AAA is financed with (market values) 200 debt and 300 equity. Cost of debt is 6%, cost of equity is 12%. The corporate tax rate is 35%. Firm AAA is considering a new project that will produce the following free cash flows:
Year 0 - 100
Year 1 40
Year 2 50
Year 3 60
Assume that this new project is of average risk for AAA and that the firm wants to hold constant its debt to equity ratio. AAA's unlevered cost of capital is closest to?
Year 0 - 100
Year 1 40
Year 2 50
Year 3 60
Assume that this new project is of average risk for AAA and that the firm wants to hold constant its debt to equity ratio. AAA's unlevered cost of capital is closest to?
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Corporate Finance
Authors: Jonathan Berk and Peter DeMarzo
3rd edition
978-0132992473, 132992477, 978-0133097894
