Reference no: EM132284789
Ramblin Wreck is a firm specializing in engineering components. The firm is publicly traded and is considering the following project:
The project will last 5.00 years with an annual cash flow of $40.00 million. The project will require an initial investment of $140.00 million
The firm must determine the cost of capital to evaluate the project. (The project is within the firm's normal activities)
Ramblin Wreck, Inc. Financial Data:
STOCK DATA:
Current Price Per Share: $27.00
Current Price Per Bond: $927.00
# of Shares: 2.00 million
# of bonds: 20,000.00
Book Value: $50 million
BOND DATA:
Annual Coupon Rate: 9.00%
Face Value Per Bond: $1,000
Maturity: 10 years
The risk free rate in the economy is currently 2.00%, while investors have a market risk premium of 8.00%. Ramblin Wreck, Inc. has a beta of 1.42. The tax rate is 38.00%.
What is the WACC for the project?