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iCar plc is considering increasing the production of its self-driven cars by investing in a new machinery technology as part of its long-term investment commitment. Its production strategy is very

iCar plc is considering increasing the production of its self-driven cars by investing in a new machinery technology as part of its long-term investment commitment. Its production strategy is very similar to Tesla Motors, Inc (TSLA), and as such, iCar plc will be employing its beta of 0.99. If the risk-free borrowing rate is 3%, the market risk premium is 5%, the cost of debt is 8% and its debt is three times equity, what is the weighted average cost of capital for the project assuming a corporate tax rate of 40%?

(a) 4.39%

(b) 5.59%

(c) 4.85%

(d) 6.38%

Apr 18 2021 View more View Less

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