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You are the CEO of a conglomerate and are evaluating a project in the furniture business. Your company is financed 5 0 % by debt
You are the CEO of a conglomerate and are evaluating a project in the furniture business. Your company is financed by debt and will always remain that way. You have found public data on three pure play furniture companies: Company is solely financed by equity and has the same market capitalization as your company, Company is financed by debt and by equity, and company is solely financed by equity but is much smaller than your company. Which of the following statements is TRUE when it comes to calculating the cost of capital aka expected return on assets for your project? Ignore taxes.
You should only use data from Company since it has the same capital structure as your company
You should only use data from Company and Company since they are both unlevered firms and you are calculating the unlevered cost of capital for the project
You should only use data from Company since it is unlevered and has the same market capitalization as your company
You can use data from all three companies in your calculations
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