What is after-tax weighted average cost of capital

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Droz's Hiking Gear, Inc. has found that its common equity capital shares have a beta equal to 2.25 while the risk-free return is 9 percent and the expected return on the market is 15 percent. It has 8-year semiannual maturity bonds outstanding with a price of $1,150 that have a coupon rate of 8 percent. The firm is financed with $150 million of common shares (market value) and $80 million of debt. What is the after-tax weighted average cost of capital for Droz's, ifit is subject to a 35 percent marginal tax rate? Round your final percentage answer to three decimal places.

Reference no: EM131932243

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