Explore BrainMass
Share

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.

© BrainMass Inc. brainmass.com July 19, 2018, 7:31 pm ad1c9bdddf

Solution Preview

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.

$2.19