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For funding of the expansion project, the promoters agreed to infuse 50% in the form of equity with the rest (50%) being financed from issue
For funding of the expansion project, the promoters agreed to infuse 50% in the form of equity with the rest (50%) being financed from issue of new debt. Based on the current credit postion and market scenario, new debt can be raised by the company at 12% per annum. Cost of equity was assumed to be 15% by Santosh. He reckons the requisite discounting rate or weighted average cost of capital (WACC) for NPV and IRR calculations may be determined with the help of these assumptions.
Find the WACC.
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