CORPORATE FINANCE CUSTOM W/CONNECT >BI
CORPORATE FINANCE CUSTOM W/CONNECT >BI
11th Edition
ISBN: 9781307036633
Author: Ross
Publisher: MCG/CREATE
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Textbook Question
Chapter 13, Problem 1CQ

Project Risk If you can borrow all the money you need for a project at 6 percent, doesn’t it follow that 6 percent is your cost of capital for the project?

Expert Solution & Answer
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Summary Introduction

To determine: The respond to the given statement.

Introduction:

The cost of capital is the WACC (Weighted Average Cost of Capital) is the total rate of return for a company which anticipates reimbursing all their investors. It is considered as a financing resource in the target capital structure of a company and it measured in terms of weights of fractions.

Explanation of Solution

Statement: If money borrowed at 6% doesn’t it follow that 6% percent as cost of capital for the project?

“No the statement is false”

Reason:

Because the cost of capital of a project is based on the riskiness of a project. Additionally the origin of money will not considered as cost of capital.

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Chapter 13 Solutions

CORPORATE FINANCE CUSTOM W/CONNECT >BI

Ch. 13 - Calculating Cost of Equity The Dybvig Corporations...Ch. 13 - Prob. 2QPCh. 13 - Calculating Cost of Debt Shanken Corp. issued a...Ch. 13 - Calculating Cost of Debt For the firm in the...Ch. 13 - Calculating WACC Mullineaux Corporation has a...Ch. 13 - Taxes and WACC Miller Manufacturing has a target...Ch. 13 - Finding the Capital Structure Farnas Llamas has a...Ch. 13 - Book Value versus Market Value Filer Manufacturing...Ch. 13 - Calculating the WACC In the previous problem,...Ch. 13 - Prob. 10QPCh. 13 - Finding the WACC Given the following information...Ch. 13 - Finding the WACC Titan Mining Corporation has 8.7...Ch. 13 - SML and WACC An all-equity firm is considering the...Ch. 13 - Calculating Flotation Costs Suppose your company...Ch. 13 - Calculating Flotation Costs Southern Alliance...Ch. 13 - WACC and NPV Och, Inc., is considering a project...Ch. 13 - Prob. 17QPCh. 13 - Flotation Costs Goodbye, Inc., recently issued new...Ch. 13 - Calculating the Cost of Equity Floyd Industries...Ch. 13 - Firm Valuation Schultz Industries is considering...Ch. 13 - Prob. 21QPCh. 13 - Flotation Costs and NPV Photochronograph...Ch. 13 - Flotation Costs Trower Corp. has a debt-equity...Ch. 13 - Project Evaluation This is a comprehensive project...Ch. 13 - Prob. 1MCCh. 13 - Prob. 2MCCh. 13 - Go to www.reuters.com and find the list of...Ch. 13 - You now need to calculate the cost of debt for...Ch. 13 - You now have all the necessary information to...Ch. 13 - You used Tesla as a representative company to...
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