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What is a firm weighted-average cost of capital

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Question - Rearden Metal currently has no debt and an equity cost of capital of 14%. Suppose that Rearden decides to increase its leverage and maintain a market debt-to-value ratio of 1/2. Suppose Rearden's debt cost of capital is 8% and its corporate tax rate is 40%. Assuming that Rearden's pre-tax WACC remains constant, then with the addition of leverage its effective after-tax WACC will be closest to:

What is a firm's weighted-average cost of capital if the stock has a beta of 1.45, Treasury bills yield 5%, and the market portfolio offers an expected return of 14%? In addition to equity, the firm finances 30% of its assets with debt that has a yield to maturity of 9%. The firm is in the 35% marginal tax bracket.

Reference no: EM132737010

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