An engineering team for a corporation has decided to move forward with a project that will cost $82 million and now they

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An Engineering Team For A Corporation Has Decided To Move Forward With A Project That Will Cost 82 Million And Now They 1 (34.49 KiB) Viewed 29 times

An engineering team for a corporation has decided to move forward with a project that will cost $82 million and now they have to obtain the funding for this. Since they don't have $82 million in retained earnings they need to raise the capital by other means. The finance department for the company has decided the best way to raise funds is a combination of issuing stocks, getting a bank loan, and issuing bonds. They plan to sche $50 million worth of stocks. The stockholders expect a rate of return of 12%. The company will get a bank loan at an interest rate of 10% worth $12 million. The company will also sell bonds worth $20 million at a rate of 6% compounded yearly. Determine the before tax cost of capital for the company. Thus, calculate the Weighted Average Cost of Capital or WACC.