The common stock of Buildwell Conservation & Construction Incorporated (BCCI) has a beta of 0.9. The Treasury bill rate is 4%, and the market risk premium is estimated at 8%. BCCI’s capital structure is 30% debt, paying an interest rate of 5%, and 70% equity. The debt sells at par. Buildwell pays tax at 21%. What is BCCI’s cost of equity capital? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place. What is its WACC? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. If BCCI is presented with a normal project with an internal rate of return of 12%, should it accept the project if it has the same level of risk as the current firm?
The common stock of Buildwell Conservation & Construction Incorporated (BCCI) has a beta of 0.9. The Treasury bill rate is 4%, and the market risk premium is estimated at 8%. BCCI’s capital structure is 30% debt, paying an interest rate of 5%, and 70% equity. The debt sells at par. Buildwell pays tax at 21%.
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What is BCCI’s
cost of equity capital?Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.
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What is its WACC?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
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If BCCI is presented with a normal project with an
internal rate of return of 12%, should it accept the project if it has the same level of risk as the current firm?
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