General Studies · Weighted Average Cost of Capital
A telecommunications firm is planning a 5000 crore rollout of 5G services. The current capital structure consists of 10,000 crore in equity (market value) and 5,000 crore in debt. The corporate tax rate is 25 percent. The risk-free rate is 6.5 percent, and the market risk premium is 7.5 percent. For the expansion, analysts suggest a project beta of 1.4. The company will finance the rollout with 3000 crore of new debt (at 9.5 percent pre-tax yield) and 2000 crore of internal accruals (equity). What is the marginal cost of capital (WACC of the expansion project) for this rollout?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 112.35 percent
- 211.42 percent
- 311.075 percent✓
- 410.98 percent
Correct answer
11.075 percent
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