CAPM Costof EquityDebt byAssetMarketcapitalisation(Full float)WACC of thenew project PCA Ltd is a listed firm and considering to invest in a new project. The newproject would be having the same business risk and the same leverage asthat of the company. Please consider the information below and answerthe following question assuming that the CAPM holds.Relevant informationRisk Free RateHistorical standard deviation of the marketMarket Risk Premium5.00%10.00%10.00%Last year market returnTax Rate of PCA Ltd25.60%30.00%Cost of debt of PCA Ltd10.00%Beta of PCA Ltd.Value of Long Term Debt of PCA LtdNo. of shares outstanding for PCA LtdBook value per share of shares of PCA LtdAverage per share price of shares of PCA Ltd1.515,00,00,0001,00,00,0001017.5

Risk free rate = 5% Market risk premium = 10% Tax rate = 30% Cost of debt = 10% Beta = 1.5 Debt =…

Answered: Debt by Asset Market capitalisation…

Business

Finance

Debt by Asset Market capitalisation (Full float) WACC of the new project

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 20P

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