Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Amcor Ltd is a paper packaging company that currently has a beta of 0.49,debt with a market value of $11.5 million and equity with a market value of $5.7 billion.Amcor is considering expanding into the manufacture of personal protective equipment,a project that is of similar risk to the activities of Ansell Ltd.Ansell's beta is 0.91,and it has debt of with a market value of $1.4 billion and equity with a market value of $2 million.
The current cost debt for Amcor is 5% p.a. compounding semi-annually,the current yield on government bonds is 2% p.a. and the equity market risk premium is estimated to be 6% p.a. compounded annually.The tax rate is 30%.
a.Calculate Amcor's
b.Calculate Amcor's WACC for the project.
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