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What is its WACC

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Question - It has been estimated that fund spent on the expansion will have an IRR of 10 percent. The firm has been utilizing a debt / total assets ratio of 40 percent as the target capital structure. It currently has a bond issue with 20 years to maturity outstanding that has a coupon rate of 5 percent. However, the bonds are selling in the market for $705; therefore, new debt costs 8 percent. The firm faces a tax rate of 30 percent, and any new debt it issues will have a 20-year maturity, what is its WACC?

Reference no: EM132925969

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