Xz inc a producer of plastic cups has cost of equity re

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XYZ Inc., a producer of plastic cups has cost of equity rE = 15% and cost of debt rD = 3%; its capital consists of equity E=$100 and debt D=$50. It is investing in a project to produce printing paper, a new line of business for the company. MSI is a printing paper company and it has costs of equity and debt, as follows: rE = 12% and rD = 4%. MSI has the same capital structure as XYZ Inc. What unlevered cost of capital should XYZ Inc use for this project?

Reference no: EM13611882

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