You have a project that will involve the purchase of real estate and renovation of the real estate. Your analysis indica
Posted: Wed Jul 06, 2022 6:42 pm
You have a project that will involve the purchase of real estateand renovation of the real estate. Your analysis indicated theproject should have an IRR of 10%. Financing will consist of amortgage (debt) of $90,000 which represents 70% of the financing.The pretax cost of debt is estimated to 8.5%. The remainingproportion of the financing will come from selling shares of yourstock portfolio. Historically, your return has been 11%. Yourmarginal tax rate is 21%. Should you pursue the project and what isthe WACC?
Group of answer choices
1. Yes, the WACC is 7.308 % and is less that the IRR of 10%.
2. Yes, the WACC is 9.25% and is less than the IRR of 10%.
3. Yes, the WACC is 8.001% and is less than the IRR of 10%.
could you please show workings . thank you
Group of answer choices
1. Yes, the WACC is 7.308 % and is less that the IRR of 10%.
2. Yes, the WACC is 9.25% and is less than the IRR of 10%.
3. Yes, the WACC is 8.001% and is less than the IRR of 10%.
could you please show workings . thank you