Estimate for the projects unlevered cost of capital

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You would like to estimate the weighted average cost of capital for a new airline business. Based on its industry asset beta, you have already estimated an unlevered cost of capital for the firm of 9%. However, the new business will be 25% debt financed, and you anticipate its debt cost of capital will be 6%.

a) What is your estimate for the projects unlevered cost of capital? (round to the nearest tenth of a percent)

b) If the corporate tax rate is 40%, what is your estimate of its WACC? (round to the nearest tenth of a percent)

Reference no: EM132908359

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