Reference no: EM132826197

Your firm is considering building a $600 million plant to manufacture HDTV circuitry. You expect operating profits (EBITDA) of $145 million per year for the next 10 years. The plant will be depreciated on a straight-line basis over 10 years starting from year 1. In other words at t=0, they will incur a capital expenditure of $600 million, and they will be able to expense $60 million per year as depreciation in years t=1,...,10. The project requires $50 million in working capital at the start (year 0), which will be recovered in year 10 when the project shuts down. All cash flows occur at the end of the year.

The corporate tax rate is 35%, the risk-free rate is 5%, the market risk premium is 6%, and the asset beta for the consumer electronics industry is 1.67.

What is the project's unlevered cost of capital? (Please express your answer in percentage points with one digit after the decimal point.]