About the weighted average cost of capital

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Jacks Toys Inc. has an unlevered cost of equity of 8.5% with a pre-tax cost of debt of 4.5%. Both the book and the market value of debt is $480,000. Earnings before interest and taxes are $264,500 and the tax rate is 35%.

What is Jacks Toy’s weighted average cost of capital? (Assume there is no cost of financial distress).

Reference no: EM131997736

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