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The average unlevered beta of publicly traded Sodium Chlorate businesses is 0.94. Assume zero debt beta. The target capital structure that is appropriate for Collinsville plant is 35% debt and 65% equity. Assume a risk-free rate of 9.5% and market risk premium of 7.5%. The firm could issue debt for this investment at a cost of 11.25%. Corporate tax rate is 48%.

The NPV of the Collinsville Plant is (in $ thousands):

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91374315

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