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WWE is a large conglomerate and is thinking of entering the widget business. You need to find


discount rates to find the NPV of the project. Here are is the information you need:

WWE debt-equity ratio = 1:2

WWE's interest rate on borrowings = 8%

Competitor's debt-equity ratio = 3:5

Competitor's interest rate on borrowing = 11%

Competitor's equity beta = 1.8

Corporate tax rate for both firms = 40%

Market risk premium = 6%

Risk-free rate = 5%

What is WWE's cost of levered equity?

A. 15.47%

B. 15.63%

C. 15.87%

D. 16.49%

E. 16.88%

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