The Kamwendo company has a current market value of sh.1000,000,half of which is debt .Its weighted  average  cost  of  capital  is  9%,and  the  corporate  tax  rate  is  40%.  The  treasurer proposes  to  undertake  a  new  project  ,which  costs  sh.500,000  and  which  can  be  financed completely with debt .The project is expected to have the same operating risk as the company and to earn 8.5% on its levered after tax marginal cost of the debt used to finance it. What do you think? 

Answer rating: 100% (QA)

1 Currently Market value of Debt 500000 Market value of equity 500000 NOPAT Market value of firm WAC... View the full answer