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Robertson Intel Company (RIC) has an equity cost of capital of 9%, market capitalization of $20 billion, and an enterprise value of $60 billion. Suppose
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Robertson Intel Company (RIC) has an equity cost of capital of 9%, market capitalization of $20 billion, and an enterprise value of $60 billion. Suppose RICs debt cost of capital is 5.0% and its marginal tax rate 40%. RIC will implement a project delivering Free Cash Flows of $105 million in year 1; $110.25 million in year 2; and $115.76 million in year 3. RICs WACC and the levered value (VL) of the project are:
a. 5.0% and $300 million
b. 6.33% and $287.85 million
c. 6.0% and $289.66 million
d. 4.0% and $301 million
Robertson Intel Company (RIC) has an equity cost of capital of 9%, market capitalization of $20 billion, and an enterprise value of $60 billion. Suppose RICs debt cost of capital is 5.0% and its marginal tax rate 40%. RIC will implement a project delivering Free Cash Flows of $105 million in year 1; $110.25 million in year 2; and $115.76 million in year 3. RICs WACC and the levered value (VL) of the project are:
| a. | 5.0% and $300 million | |
| b. | 6.33% and $287.85 million | |
| c. | 6.0% and $289.66 million | |
| d. | 4.0% and $301 million |
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