ABC Company has an after-tax cost of debt of 6 percent

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January 2nd, 2018

ABC Company has an after-tax cost of debt of 6 percent, beta of .85, tax rate of35 percent, and a target capital structure of 60 percent equity and 40 percent debt. Ten year Treasury securities are yielding 4 percent and the risk premium for ABC is 5.1 percent.What is ABC’s WACC?AndABC Company is considering two mutually exclusive projects.Project S has an initial cost of $10,000 with expected annual cash flows of $3,000 for the next five years.Project L has an initial cost of $25,000 with expected annual cash flows of $7,400.ABC’s cost of capital is 12%.Calculate the NPV, IRR, and Profitability Index for each project. Which project should ABC choose?

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