A firm with $1,000,000 in assets and 50 debt in its capital structure is considering a $250,000 project The firm 's after tax weighted average cost of capital is 10 4 , the marginal cost of debt is 8 (before taxes), and the marginal tax rate is 40 If the project does not change the firm 's operatin...

There are two possible assumptions about the appropriate capital structure a that it cannot support ...

A firm with $1,000,000 in assets and 50% debt in its capital structure is considering a $250,000

Question:

A firm with $1,000,000 in assets and 50% debt in its is considering a $250,000 project. The firm's after-tax weighted average is 10.4%, the marginal is 8% (before taxes), and the marginal tax rate is 40%. If the project does not change the firm's operating risk and is financed exclusively with new equity, what rate of return must it earn to be acceptable?
Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking...