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What is the cost of capital for this project

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Question - Your local municipality is building a new complex housing the homeless. The municipality is listed on the local exchange with an equity return of 8%. For building the new complex, the municipality raises 50% of the capital through bank loans (the bank pays 4% on deposits and charges 6% on loans). 20% of the capital comes from donations from public for which the public get tax benefits. If the tax rate for the municipality is 20% and the remaining capital is sourced from equity holders of the municipal corporation, what is the cost of capital for this project?

Reference no: EM133042235

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