Suppose a firm has both a current and a target debtequity ratio of 0.6, a...
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Finance
Suppose a firm has both a current and a target debtequity ratio of 0.6, a cost of debt of 10%, and a cost of equity of 20 percent. The corporate tax rate is 40%. Suppose the firm is considering a project. This project is expected to have 15 million in cash flows a year and it will last for 5 years. It will cost 50 million to launch it. The project will have the same risk level with the firm and the firm plans to use equity to fully finance this project. As a financial advisor of this firm, what would be your view for this project.
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