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Compute the weighted average cost of capital

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Reference no: EM131037357

Below is information the firm's capital structure. Use the information given to compute the weighted average cost of capital.  Do this in the same spreadsheet that you computed the operating cash flows.

Book Value of Debt

$1,500,000,000

Market Value of Debt

$2,750,000,000

Book Value of Equity

$1,500,000,000

Market Value of Equity

$3,750,000,000

Beta

1.25

Risk free rate

5.25%

Expected return on the market

14.25%

YTM on AAI's debt

8.75%

Tax rate

35%

Reference no: EM131037357

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