Considering a project that requires an investment

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Reference no: EM131595821

Owen Industries has a capital structure of 40% debt and 60% equity. KJWE is considering a project that requires an investment of $2.6 million. To finance this project, KJWE plans to issue 10-year bonds with a coupon interest rate of 12%. Each of these bonds has a $1,000 face value and will be sold to net KJWE $980. If the current risk-free rate is 7% and the expected market return is 14.5%, what is the weighted cost of capital for KJWE? Assume the company has a beta of 1.20 and a marginal tax rate of 40%.

14.9%

12.5%

13.4%

16.0%

Reference no: EM131595821

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