Lawler's is considering a new project.The company has a debt-equity ratio of 0.72.The company's cost of equity is 15.1 percent,and the aftertax cost of debt is 7.2 percent.The firm feels that the project is riskier than the company as a whole and that it should use an adjustment factor of +3 percent.What is the WACC it should use for the project?

Question

Quizplus · Accepted Answer

Project cost of capital = (1/1.72)(0.151) + (0.72/1.72)(0.072) + 0.03 = 14.79 percent

Lawler's Is Considering a New Project