What is BCCIs cost of equity capital

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Reference no: EM131923805

The common stock of Buildwell Conservation & Construction Inc. (BCCI) has a beta of .9. The Treasury bill rate is 4%, and the market risk premium is estimated at 8%. BCCI’s capital structure is 38% debt, paying an interest rate of 7%, and 62% equity. The debt sells at par. Buildwell pays tax at 40%.

a. What is BCCI’s cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

Cost of equity capital %

b. What is its WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

WACC %

c. If BCCI is presented with a project with an internal rate of return of 12%, should it accept the project if it has the same level of risk as the current firm?

Yes

Reference no: EM131923805

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