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Cost of capital for such risky project

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A company is considering a project that will result in after-tax cash savings.The firm has a target dept-equity ratio of 0.65, a cost equity of 15 % and an after tax cost of debt of 5.5 % The cost-saving proposal is somewhat riskier than the usual project the firm undertakes. Management uses the subjective approach and applies an adjustment factor of + 2% to the cost of capital for such risky project. Under what circumstances should the company take on the project?

Reference no: EM132406976

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