Question: Consider a project whose EBIT is either high or low each year and for ever. Each period the probability that EBIT is high is 25%.

Consider a project whose EBIT is either high or low each year and for ever. Each period the probability that EBIT is high is 25%. EBIT is 100M when low. The standard deviation of yearly EBIT is 200M. Depreciation equals investment. The relevant tax rate for this investment project is 20%. It is financed by an interest only debt perpetuity while the rest is equity so that the capital structure is constant throughout. The market value of the project (the market value of debt plus the market value of equity) is 2,000M. What is this projects WACC? State your answer in percentage terms with two decimals.

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