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Problem 12-20 Calculating the WACC [LO 3] Gnomes R Us is considering a new project. The company has a debt-equity ratio of .71. The companys
Problem 12-20 Calculating the WACC [LO 3] Gnomes R Us is considering a new project. The company has a debt-equity ratio of .71. The companys cost of equity is 14.8 percent, and the aftertax cost of debt is 8.1 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.
Problem 12-20 Calculating the WACC [LO 3] Gnomes R Us is considering a new project. The company has a debt-equity ratio of 71. The company's cost of equity is 14.8 percent, and the aftertax cost of debt is 8.1 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. Requirement 1: What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) WACC Requirement 2: What discount rate should the firm use for the project? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Project discount rate %Step by Step Solution
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