1. Tim Horton's is considering a project to make jumbo jets. Should Tim's undertake the project?...

 

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1. Tim Horton's is considering a project to make jumbo jets. Should Tim's undertake the project? The following data may be useful. ● ● ● ● ● . ● Tim's has a target D/E of 0.6. Tim's current beta is 1.1. Boeing has a D/E of 1.2 and a beta of 2.1. Assume the risk free rate is 4% and the market risk premium is 6%. The project will cost $1 billion, and will generate EBIT of $175 million. Assume the entire project cost will consist of assets which will be eligible for CCA with a CCA rate of 20%. Assume the project will run indefinitely. Tim's planning to finance this project at the same D/E level that the company currently enjoys, and assume that both firms can borrow at 5%. All firms pay tax at a rate of 25%. 1. Tim Horton's is considering a project to make jumbo jets. Should Tim's undertake the project? The following data may be useful. ● ● ● ● ● . ● Tim's has a target D/E of 0.6. Tim's current beta is 1.1. Boeing has a D/E of 1.2 and a beta of 2.1. Assume the risk free rate is 4% and the market risk premium is 6%. The project will cost $1 billion, and will generate EBIT of $175 million. Assume the entire project cost will consist of assets which will be eligible for CCA with a CCA rate of 20%. Assume the project will run indefinitely. Tim's planning to finance this project at the same D/E level that the company currently enjoys, and assume that both firms can borrow at 5%. All firms pay tax at a rate of 25%.