Question
The capital structure of Firm B consists of 70% debt and 30% equity. The pre-tax cost of the debt is 12% and the tax
The capital structure of Firm B consists of 70% debt and 30% equity. The pre-tax cost of the debt is 12% and the tax rate is 30%. The risk-free interest rate is 5%, and the market risk premium (again) is 6%. Firm beta is 1.25. a) Find the weighted average cost of capital b) Would this firm accept a project with an internal rate of return of 8%? Why?
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Entrepreneurial Finance
Authors: J. Chris Leach, Ronald W. Melicher
6th edition
1305968352, 978-1337635653, 978-1305968356
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