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Unformatted text preview: 7.40% = historical average excess return of S&P 500 RESULT Project equity beta 1.05 Market risk premium 7.40% Equity risk premium 7.74% Plus risk-free rate 6.00% Cost of equity 13.74% Note: The estimate of the market risk premium is the arithmetic average from 1927-1997, based on the Ibbotson Associates "Stocks, Bonds, Bills and Inflation" data. DATA Cost of debt 9.0% RESULT Weighted Weights Cost After-tax cost of debt 5.4% 40.0% 2.2% Cost of equity 13.7% 60.0% 8.2% Weighted average cost of capital 10.4%...
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- Spring '10