Hi,
The question is a company is going for a new project. and the company’s cost of debt is 6 % and its D/E
ratio is 19%, tax rate is 30%, rf = 2.49%, MRP is 7.21%. the company expects to finance the furniture division using the same mix of debt and equity. now i have calculated the levered beta for project is 1.2. but how should i calculate the cost of capital for project? should i should CPAM to get Re (this is the cost of capital) or should i get Re of the project and then use wacc with tax formula.
thank you very much.
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