Using cost of capital to determine feasibility of a project
Calculate the weighted average cost of capital (WACC) for Apex Printing given these assumptions. Weights of 40% debt and 60% common equity, a 35% tax rate, cost of debt is 8% Beta of the company is 1.5 Risk free rate is 2% and return on the market is 11%. Indicate how these cost of capital might be used to determine the feasibility of the capital project.
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Weight of equity=we=60%=0.60
Beta=b=1.5
Risk free rate=rf=2%
Market return=rm=11%
Required return on ...
Solution Summary
The solution depicts the steps to estimate the WACC in the given case.
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... is the appropriate discount rate to use for cash ...costs will change proportionally by the discount factor used. ... much tax will impact the overall cost of capital...
... as a whole and, as such, it is often used internally by ... It is the appropriate discount rate to use for cash ... 1. No brokerage fees (ie, transactions costs) 2. No ...
