Sun, a chain of coffee shops, would like to diversify its business operations by branching...
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Sun, a chain of coffee shops, would like to diversify its business operations by branching out into the copy shop business. Sun is in the 20 % tax bracket and has a debt-to-capital ratio of 35%. The proposed investment in the copy shop business will be financed with 25% debt and 75% equity. The market risk premium is 6.3 % and the risk-free rate of interest is expected to remain constant at 5.5%. Sun's cost of debt is 7%. If the average for the pure play companies is 0.54 , what is the WAAC for this project? (write this number as a decimal and not as a percentage, e.g. 0.11 not 11%. Round your answer to three decimal places. )
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