Compute the weighted average cost of capital

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Question - Your lecturer encourages you to invest in a firm on the Asian continent. The firm has a total asset base of US$20 million. Number of ordinary shares outstanding is 3.9 mil with a value of US$2.00 per share. The firm debt has a yield of 8% on its debt. Your research reveals that the current Treasury bill rate in Asia is 5.5% and that the beta for similar firms in the industry is 1.2. You discussed the idea with a friend and he informs you that the expected market return on the Asian stock market is 16% and that the tax rate is 40%. Compute the weighted average cost of capital (WACC).

Reference no: EM133022229

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