SOLVED PROBLEMS 21 The following information is available for Avinash Metals. Net operating income 40 million Interest on debt 10 million Cost of equity 18 percent Cost of debt (a) What is the average cost of capital of Avinash? (b) What happens to the average cost of capital of Avinash, if it employs 100 million of debt to finance a project which earns an operating income of 20 million? Assume that the net operating income (NOI) method applies and there are no taxes. 12 percent