What is the project weighted average cost of capital

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Reference no: EM131609000

A firm with a corporatewide debt-to-equity ratio of 1: 2, an after-tax cost of debt of 7%, and a cost of equity capital of 15% is interested in pursuing a foreign project. The debt capacity of the project is the same as for the company as a whole, but its systematic risk is such that the required return on equity is estimated to be about 12%. The after-tax cost of debt is expected to remain at 7%. What is the project's weighted average cost of capital? How does it compare with the parent's WACC? Suppose that a foreign project has a beta of 0.85, the risk-free return is 12%, and the required return on the market is estimated at 19%. What is the cost of capital for the project?

Reference no: EM131609000

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