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Based on market value-weighted average cost of capital

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ABC Manufacturing’s current capital structure is comprised of 35% debt and 65% equity (based on market values). Their current equity beta is 1.40. The company’s bonds have a 7% annual coupon, 20-years to maturity, and currently trade at $1100. The risk-free rate is 4.5% on long-term government bonds. The market risk premium is 5.25%. Assume a marginal tax rate of 35%.

What is ABC’s weighted average cost of capital?

Reference no: EM131452303

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