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= = Part A. A firm's (firm XYZ) market value of equity is $11.5 million, ks = 21.8% (cost of equity capital), market value of
= = Part A. A firm's (firm XYZ) market value of equity is $11.5 million, ks = 21.8% (cost of equity capital), market value of debt is $5.8 million, and kp = 8.7% (cost of debt capital). A new investment opportunity (or project) with an expected rate of return of 16.5% is available, which is considered by the firm XYZ. This project is 45% riskier than the firm's XYZ average operations. The rf 4.5% (riskless rate of return). Assume no taxes. Should XYZ accept this project? =
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