Use the following information for a firm. Target capital structure = 40% debt and 60% equity Cost

Question:

Use the following information for a firm.
Target = 40% debt and 60% equity
Cost of debt = 8%
Cost of equity = 12%
Tax rate = 40%
1) Find the firm's WACC.
2) As a manager, you consider the following project.
Project X that costs $900,000 is expected to produce $400,000 per year for 3 years.
Is Project X acceptable? Why? Assume that Project X is as risky as the firm's existing assets.
Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a...