Question
Gnomes R Us is considering a new project. The company has a debt-equity ratio of .48. The company's cost of equity is 11.8 percent, and
Gnomes R Us is considering a new project. The
company has a debt-equity ratio of .48. The company's cost of equity is
11.8 percent, and the aftertax cost of debt is 5.6 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 WACC it should use for the
project?
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Introduction To Finance Markets, Investments, And Financial Management
Authors: Ronald W. Melicher, Edgar A. Norton
17th Edition
1119561175, 978-1119561170
