Calculate WACC and Rate of Return
Capital Structure:
50% debt and 50% equity financing
Current cost of debt is 2% above prime (Prime is currently 2.5%)
cost of equity is estimated to be 20%
Marginal tax rate is 37%
Investment:
Equipment that costs $850,000
Installation Fees of $10,000
Updates every year $2,000 (assuming they dont need a update until the end of the first year)
My work:
Capitalizing on the equipment, we have $860,000
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