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The average unlevered beta of publicly traded Sodium Chlorate businesses is 0.94. Assume zero debt betas. 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%.

What is the appropriate cost of capital for the valuation of the Collinsville plant? Write your answer in percent but without the percent sign and limit it to two decimal points

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91375481

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