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Category > Business & Finance Posted 15 Jul 2017 My Price 7.00

Mitsubishi Inc. is a levered firm

Mitsubishi Inc. is a levered firm with a debt-to-equity ratio of 0.25. The beta of common stock is 1.15, while the beta of debt is 0.3. The market-risk premium is 10 percent and the risk-free rate is 6 percent. The corporate tax rate is 35 percent. The SML holds for the company.

a. If a new project of the company has the same risk as the common stock of the firm, what is the cost of equity on the project?

b. If a new project of the company has the same risk as the overall firm, what is the weighted average cost of capital on the project?

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Status NEW Posted 15 Jul 2017 09:07 AM My Price 7.00

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