Will and Ben Ice Cream plan to build a new mixing plant to serve customers in Mexico. Because the company is in good financial shape with equity funds returning 11% per year, the bank will charge an interest rate of 8% per year for the loan. An MARR that is
Will and Ben Ice Cream plan to build a new mixing plant to serve customers in Mexico. Because the company is in good financial shape with equity funds returning 11% per year, the bank will charge an interest rate of 8% per year for the loan. An MARR that is
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Will and Ben Ice Cream plan to build a new mixing plant to serve customers in Mexico.
Because the company is in good financial shape with equity funds returning 11% per
year, the bank will charge an interest rate of 8% per year for the loan. An MARR that is
5% over the WACC is required to proceed with the project, which sets the MARR at
14%. What percentage of debt financing can the company assume to meet its MARR
requirement?
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