Reference no: EM132068360

· An Individual Project requiring to calculate Weighted Average Cost of Capital (WACC).

· This will require in turn a calculation of required return on equity, which has two possible methods for estimating.

· Describe capital structure.

· Determine the WACC given the above assumptions.

· Indicate how these might be useful to determine the feasibility of the capital project.

· Recommend which is more appropriate to apply to project evaluation.

· Define marginal cost of capital.

· determine the required return for our intended project so that we have a decision criteria defined for the project

· describe capital structure and to calculate the weighted average cost of capital (WACC)

· determine the target WACC for API., given these assumptions:

o Weights of 40% debt and 60% common equity (no preferred equity)

o A 35% tax rate

o Cost of debt is 8%

o Beta of the company is 1.5

o Risk-free rate is 2%

o Return on the market is 11%

o indicate how these costs of capital might be used to determine the feasibility of the capital project

recommendation about which is more appropriate to apply to project evaluation