Buster's target debt-to-equity ratio is 0.65, its cost of equity is 13.7 percent, and its beta is 0.9. The after-tax cost of debt is 5.8 percent, the tax rate is 34 percent, and the risk-free rate is 2.3 percent. W discount rate should be assigned to a new project the firm is considering if the project's beta is estimated at 0.87?

Buster's target debt-to-equity ratio is 0.65, its cost of equity is 13.7 percent, and its beta is 0.9. The after-tax cost of debt is 5.8 percent, the tax rate is 34 percent, and the risk-free rate is 2.3 percent. W discount rate should be assigned to a new project the firm is considering if the project's beta is estimated at 0.87?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 6P

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