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Capital structure at debt-equity ratio

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Reference no: EM132770507

Tiger Corporation is embarking on a 10-year energy project that requires initial investment of RM 2.5 million with an estimated annual after tax inflow of RM 500,000 throughout the project life. Other financial information related to the project financing is given as follows:

Type of financing Cost of capita Cost of underwriting
Equity 8.5% 6%
Debt Before tax 5.5% 3%

Assuming the company maintains its capital structure at debt-equity ratio of 75% and pays corporate tax of 30 percent. Determine the weighted average cost of capital for the project.

Reference no: EM132770507

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