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The common stock of Buildwell Conservation & Construction Incorporated (BCCI) has a beta of 0.9. The Treasury bill rate is 4%, and the market risk
The common stock of Buildwell Conservation & Construction Incorporated (BCCI) has a beta of 0.9. The Treasury bill rate is 4%, and the market risk premium is estimated at 9%. BCCIs capital structure is 21% debt, paying an interest rate of 6%, and 79% equity. The debt sells at par. Buildwell pays tax at 21%. What is BCCIs cost of equity capital? What is its WACC? If BCCI is presented with a normal project with an internal rate of return of 10%, should it accept the project if it has the same level of risk as the current firm?
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