I need help on a business project, I have most of the work completed, but I am struggling with actually putting the information
1 answer:
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Answer:
WACC 13.85600%
Explanation:
First we calculate Eastern Pizza CAPM:
risk free = 0.08
market rate = 0.12
premium market = (market rate - risk free) 0.04
beta(non diversifiable risk) = 2
Ke 0.16000
Then we solve for WACC
Ke 0.16000
Equity weight 0.8
Kd 0.08
Debt Weight 0.2
t 0.34
WACC 13.85600%
The company will use the data on eastern Pizza to evualuate project presented to it. Also, it will consider the new tax rate to determinate the tax shield.