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  3. 2. a. suppose you are tasked with coming up with a

2. a. Suppose you are tasked with coming up with a firm's weighted average cost...

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2. a. Suppose you are tasked with coming up with a firm's weighted average cost of capital to be used to evaluate a project that has the same risk as the firm's overall cash flows. You have collected the following information: The risk-free rate is 3% and the estimated Beta is 1.2 The market risk premium is 5%. The price per share is $50, and there are 2 million shares outstanding. The Book Value of Debt is $50 million and is currently selling at 95% of par. It is priced to yield 5%. Assume a tax rate of 35% Calculate the firm's overall weighted average cost of capital. Show your work. b. Suppose the firm is now considering a project that has more risky cash flows than that of the firm. Should the firm use the weighted average cost of capital you calculated in part a? Explain your answer. Would you be more likely/or less likely to reject this new project if you used the weighted average cost of capital you found in part a. Explain your

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