Waterdeep Adventure Travel has an unlevered cost of equity of13.4%, and a cost of debt...

Waterdeep Adventure Travel has an unlevered cost of equity of 13.4%, and a cost of debt of 7.8%. Their tax rate is 22%, and they maintain a capital structure of 33% debt and the rest equity. They are considering giving cave exploration tours to their menu of adventure vacations. Buying the needed equipment would cost $72,317, and would bring in $28,952 one year from today, and $81,488 two years from today. What is the NPV of this project, using the WACC method, if they invest today?

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Expert Solution

Cost of equity

R_U+(D/E)×(R_U-R_D)

16.16%

=13.4%+(33/67)*(13.4%-7.8%)

jeff jeffy answered 2 years ago

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