The common stock of Buildwell Conservation & Construction Incorporated (BCCI) has a beta of 0.9. The Treasury bill rate is 4%, and the market risk premium is estimated at 8%. BCCI's capital structure is 38% debt, paying an interest rate of 7%, and 62% equity. The
debt sells at par. Buildwell pays tax at 21%.
a. What is BCCI's cost of equity capital?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
b. What is its WACC?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. If BCCI is presented with a normal project with an internal rate of return of 12%, should it accept the project if it has the same
level of risk as the current firm?