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Gnomes R Us is considering a new project. The company has a debt-equity ratio of 74 indicating that they have $.74 of debt for each
Gnomes R Us is considering a new project. The company has a debt-equity ratio of 74 indicating that they have $.74 of debt for each $1.00 of equity. The company's cost of equity is 14.5 percent, and the aftertax cost of debt is 7.8 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. The weight (percent) of debt is: The weight (percent) of equity is: The aftertax cost of debt is: What is the company's WACC? What discount rate should the firm use for the project
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