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Unformatted text preview: A. 15.30% B. 14.90% C. 15.10% D. 15.70% E. 15.50% 13. Your companys CFO is interested in estimating the company's weighted average cots of capital (WACC) and has collected the following information: The company has bonds outstanding that mature in 18 years with an annual coupon of 7.5 percent (the bond pays $75 on an annual basis). The bonds have a face value of $1,000 and sell in the market today for $1,120, giving a before-tax cost of debt of 6.36145%. The risk-free rate is 3 percent The market risk premium is 5 percent The stock's beta is 1.2 The company's tax rate is 40 percent The company's target capital structure consists of 60 percent equity and 40 percent debt The company uses the CAPM to estimate the cost of equity and does not include flotation costs as part of its cost of capital it uses the cost of retained earnings....
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- Spring '08
- Cost Of Capital