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Unformatted text preview: which is: 0.092(1 0.34) = 0.061 or 6.1% Hence, on an aftertax basis, debt is cheaper than the preferred stock. Sixx AM Manufacturing has a target debtequity ratio of 0.51. Its cost of equity is 18 percent, and its cost of debt is 11 percent. If the tax rate is 31 percent, the company's WACC is percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16)) Explanation: Here we need to use the debtequity ratio to calculate the WACC. Doing so, we find: WACC = 0.18(1/(1+0.51)) + 0.11(0.51/(1+0.51))(1 0.31) = 0.1448 or 14.48%...
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- Spring '09