Arden Corporation is considering an investment in a new project with an unlevered cost of capital of 9 Ardens marginal corporate tax rate is 40 , and its debt cost of capital is 5 a Suppose Arden adjusts its debt continuously to maintain a constant debt equity ratio of 50 What is the appropriate WA...

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Arden Corporation is considering an investment in a new project with an unlevered cost of capital of

Question:

Arden is considering an investment in a new project with an unlevered of 9%. Arden’s marginal corporate tax rate is 40%, and its debt is 5%.
a. Suppose Arden adjusts its debt continuously to maintain a constant debt-equity ratio of 50%. What is the appropriate WACC for the new project?
b. Suppose Arden adjusts its debt once per year to maintain a constant debt-equity ratio of 50%. What is the appropriate WACC for the new project now?
c. Suppose the project has free cash flows of $10 million per year, which are expected to decline by 2% per year. What is the value of the project in parts a and b now?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... 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...