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What is its weighted average cost of capital

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Question - Clifford Chance is a large U.K. firm with the before tax cost of debt of 14%. The risk-free rate of interest on 10-year Treasury bonds is 5%. The expected return on the market portfolio is 8%. After effective taxes, Clifford Chance's effective tax rate is 20%. Its optimal capital structure is 70% debt and 30% equity. If Clifford Chance's beta is estimated at 1.4, what is its weighted average cost of capital?

Reference no: EM133001796

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