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Arden Corporation is considering an investment in a new project with an unlevered cost of capital...

Arden Corporation is considering an investment in a new project with an unlevered cost of capital of 8.9 % . ​Arden's marginal corporate tax rate is 40 % ​, and its debt cost of capital is 5.2 % .

a. Suppose Arden adjusts its debt continuously to maintain a constant​ debt-equity ratio of 0.5 . What is the appropriate WACC for the new​ project?

b. Suppose Arden adjusts its debt once per year to maintain a constant​ debt-equity ratio of 0.5 . What is the appropriate WACC for the new project​ now?

c. Suppose the project has free cash flows of $ 9.7 million per​ year, which are expected to decline by 2.2 % per year. What is the value of the project in parts ​(a​) and ​(b​) ​now?

a. Suppose Arden adjusts its debt continuously to maintain a constant​ debt-equity ratio of 0.5 . What is the appropriate WACC for the new​ project? If Arden adjusts its debt continuously to maintain a constant​ debt-equity ratio of 0.5 ​, the appropriate WACC for the new project in this case is

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Expert Solution

THIS SUM IS A MODIFIED VERSION OF TEXTBOOK SUM. SO WACC IS NOT COMING ROUND FIGURE.

I HAVE NOT ROUNDED THE WACC FOR FINDING VALUE OF THE PROJECT. THANK YOU

jeff jeffy answered 1 year ago
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