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Red Rider Shop has an adjusted WACC rate of 8.56%. The company has a capital structure...

Red Rider Shop has an adjusted WACC rate of 8.56%. The company has a capital structure consisting of 60% equity and 40% debt, a cost of equity of 11%, a before-tax cost of debt of 7% and a tax rate of 30%. The company has a Beta of 1.00, the required return on the market portfolio is 11%, the risk-free rate is 3% and the beta for the new project is estimated to be 1.30. Given this information, and assuming the cost of debt will not change if the new project is undertaken, what adjusted WACC should be used in decision-making?

a.8.56%

b.9.84%

c.10%

d.11.24%

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jeff jeffy answered 1 year ago
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