KT Enterprises is considering undertaking a new project. Based upon analysis of firms with similar projects, KT has determined that an unlevered cost of equity of 12% is suitable for their project. KT's marginal tax rate is 35%, its borrowing rate is 7%, and KT does not believe that its borrowing rate will change if the new project is accepted.

8) If KT expects to maintain a debt-to-equity ratio for this project of 1, then KT's equity cost of capital, rE, for this project is closest to:

A) 17.0%

B) 5.0%

C) 15.0%

D) 12%

Answer:

Explanation 9) If KT expects to maintain a debt-to-equity ratio for this project of .6, then KT's project-based WACC, rwacc, for this project is closest to:

A) 10.5%

B) 11.1%

C) 9.6%

D) 10.8%

Answer:

Explanation