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Your firm is planning to invest in an automated packaging plant, and you are trying to determine the cost of capital of this project. You
Your firm is planning to invest in an automated packaging plant, and you are trying to determine the cost of capital of this project. You find two comparable firms in the industry to guide your estimation. Harburtin Industries is an allequity firm that specializes in this business. Harburtin's equity beta is The second firm, Thurbinar Design, has a stock price of $ per share, and million shares outstanding. It also has $ million in outstanding debt. Thurinar has an equity beta of and debt beta of You decide to use the average unlevered beta of the two comparison firms as the estimation of your firm's unlevered beta. Suppose, your target debttoequity ratio is to fund the project, and your firm can borrow at rate. Your firm also has a debt beta of The riskfree rate is the market premium is and the corporate tax rate is What is the appropriate WACC for the automated packaging plant?
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