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ONE Calculate the weighted average cost of capital for the Luxury Porcelain Company. The book value of Luxury's outstanding debt is $60 million.

ONE
Calculate the weighted average cost of capital for the Luxury Porcelain Company.  The book value of Luxury's outstanding debt is $60 million.  Currently, the debt is trading at 120 percent of book value and is priced to yield 12 percent.  The 5 million outstanding shares of Luxury stock are trading at $20 per share.  The required return on Luxury stock is 18 percent.  The tax rate is 25 percent.

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