Company X has a cost of equity of 14% and a cost of debt of 6%. The tax rate is 35% and it currently has debt-to-equity ratio of 0.5. Company X is considering a project with an initial outlay of $100,000 followed by inflows of $60,000 in year 1, $50,000 in year 2, and $40,000 in year 3. a) What is the company's after-tax WACC? Show your workings. b) Should the Company X accept the project? Show your workings.

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a Calculating the aftertax WACC Weighted Average Cost of Capital First we need to find the weights o... View the full answer