Hi need some help in answering this question. A bit confused on the process.,,The XY Z Company has an equity beta, ?L, of 0.5 and 50% debt in its capital structure. The risk free (debt) rate in the market is 6% and the expected market rate of return is 18%. This company is considering to taken on a new project in Argo-business. The expected yield on the new project is 25%. This project shares similar risks as the Argo-industry which has an equity beta, ?L, of 2.0 and 10% debt in its capital structure. If the XYZ company needs to finance the above new project by 50% debt, then should it take on the project or not? Show your calculations assuming the marginal corporate tax rate of 50% in all cases.
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