The Debt Capacity for Iota's new project in year 0 is closest to:
A)$263.25
B)$87.75
C)$50.25
D)$118.00

Question

Quizplus · Accepted Answer

B)r_wacc = 11ea7cce_3c9e_0eff_928c_7f97d2e08899_TB1626_11 r_E + 11ea7cce_3c9e_0f00_928c_d9d3c3ab1618_TB1626_11 r_D(1 - τ_c),where D = net debt = Debt - Cash r_wacc = 11ea7cce_3c9e_0f01_928c_fded2b050012_TB1626_11 (.14)+ 11ea7cce_3c9e_3612_928c_dbaf0bb48846_TB1626_11 (.07)(1 - .35)= .1085 V₀^L = 11ea7cce_3c9e_3613_928c_6f59438152b7_TB1626_11 + 11ea7cce_3c9e_3614_928c_a1220b86aed3_TB1626_11 + 11ea7cce_3c9e_5d25_928c_572ce6773307_TB1626_11 = $263.14 D₀ = d × 11ea7cce_3c9e_5d26_928c_ebd5224f704d_TB1626_11 D₀ = 11ea7cce_3c9e_5d27_928c_657485a2ccdd_TB1626_11 ($263.14)= $87.71

The Debt Capacity for Iota's New Project in Year 0