The common stock of Buildwell Conservation & Construction Inc. (BCCI) has a beta of 0.9....
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The common stock of Buildwell Conservation & Construction Inc. (BCCI) has a beta of 0.9. The Treasury bill rate is 4%, and the market risk premium is estimated at 10%. BCCI's capital structure is 20% debt, paying an interest rate of 7%, and 80% equity. The debt sells at par. Buildwell pays tax at 21%. a. What is BCCI's cost of equity capital? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. What is its WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. If BCCI is presented with a normal project with an internal rate of return of 12%, should it accept the project if it has the same level of risk as the current firm? a. Cost of equity capital % b. WACC % C. Accept the project
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