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Discount hurdle rate-bath supplies corp

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Reference no: EM132467184

Bath Supplies Corp.'s capital structure is 60% debt and 40% equity. The company is planning to build a plant to manufacture a new type of organic toothpaste called Krud. Brightee Inc. produces only organic toothpaste. Brightee's beta is 1.2 and Brightee's capital structure is 30% debt and 70% equity. The risk free-rate is 3% and the market premium is 7%. Bath Supplies' after-tax cost of debt is 7%.

What discount hurdle rate should Bath Supplies apply to the new plant? Use the proxy firm beta method.

Proxy WACC = % (min. 2 decimals)

Use numbers and decimals only to state %, not fraction, accurate to 2 decimals.

Reference no: EM132467184

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