The Rare Find Co. has the following information:

Debt outstanding: $1,500 million

The before-tax cost of debt: 6.5%

Market cap: $4,400 million

Cost of common stock: 12%

Tax rate: 21%

Rare Find is evaluating a project with the following information:

Over the next five years, EBIT will equal 153 million each year. An investment of $100 million is required in net working capital at the beginning of the project, which will be recovered at the end.  The equipment cost will be $175 million, depreciated using the straight-line method to zero over the project's life, with no salvage value. The project requires an additional 2% risk premium above the firm's WACC.

Calculate the weight of debt for the firm. (Enter percentages as decimals and round to 4 decimals)

Answer rating: 100% (QA)

To calculate the weight of debt for the firm we need to determine the prop... View the full answer