A firm with a corporatewide debt-to-equity ratio of 1:2, an after-tax cost of debt of 7%, and a cost of equity capital of 15% is interested in pursuing a foreign project. The debt capacity of the...

A firm with a corporatewide debt-to-equity ratio of 1:2,
an after-tax cost of debt of 7%, and a cost of equity capital of 15% is interested in pursuing a foreign project. The
debt capacity of the project is the same as for the company as a whole, but its systematic risk is such that the
required return on equity is estimated to be about 12%.
The after-tax cost of debt is expected to remain at 7%.
What is the project’s weighted average cost of capital? How
does it compare with the parent’s WACC?