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What is pec estimated weighted average cost of capital

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Reference no: EM133035404

Question - Shares of the Pacific Electric Corporation (PEC) have an estimated beta of 1.10. PEC funds its assets with 50 percent debt at an average after-tax cost of debt of 6 percent. The excess return on the market portfolio is 5 percent and the risk-free rate is 3 percent.

Required -

a. What is PEC's estimated cost of equity according to the CAPM?

b. What is PEC's estimated weighted average cost of capital?

Reference no: EM133035404

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