Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:CAPM Cost
of Equity
Debt by
Asset
Market
capitalisation
(Full float)
WACC of the
new project
Transcribed Image Text:PCA Ltd is a listed firm and considering to invest in a new project. The new
project would be having the same business risk and the same leverage as
that of the company. Please consider the information below and answer
the following question assuming that the CAPM holds.
Relevant information
Risk Free Rate
Historical standard deviation of the market
Market Risk Premium
5.00%
10.00%
10.00%
Last year market return
Tax Rate of PCA Ltd
25.60%
30.00%
Cost of debt of PCA Ltd
10.00%
Beta of PCA Ltd.
Value of Long Term Debt of PCA Ltd
No. of shares outstanding for PCA Ltd
Book value per share of shares of PCA Ltd
Average per share price of shares of PCA Ltd
1.5
15,00,00,000
1,00,00,000
10
17.5
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