Question
Gnomes R Us is considering a new project. The company has a debt-equity ratio of .86. The companys cost of equity is 14.6 percent, and
Gnomes R Us is considering a new project. The company has a debt-equity ratio of .86. The companys cost of equity is 14.6 percent, and the aftertax cost of debt is 7.9 percent. The firm feels that the project is riskier than the company as a whole and that it should use an adjustment factor of +3 percent.
What is the companys WACC?
What discount rate should the firm use for the project?
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The Wall Street Journal Complete Personal Finance Guidebook
Authors: Jeff D. Opdyke
1st Edition
030733600X, 978-0274804573
