BU393 Study Guide - Quiz Guide: Market Impact, Tax Bracket, Cash Flow
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The hurdle rate the minimum rate of return that must be met for a company to undertake a particular project. Capital k = rwacc = riwdebt + rpswps + rswequity. Value of the firm (v) = s + b+ + P market value of equity (market price x number of shares) If project risk = firm overall risk, use firm wacc to evaluate the project. If project risk firm overall risk, do not use the firm wacc. We should use a discount rate that matches the risk of the project. Wacc is a discount rate that matches firm overall risk. A firm issued bonds 10 years ago at a cost of debt = 12%. The firm currently can issue bonds at a cost of debt = 10%. Which cost of debt should be used to calculate wacc: 10, 12% The firm borrows m to fund this project at a before tax cost of debt, rb =
