What is the current wacc of the company

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Question - Base case scenario - Cora Company has a capital structure containing 22% debt and 78' equity. The company's debt currently has a yield to maturity of 5%. The risk-free rate is 4% and long-ten'n market return in 10%. Cora Company's beta was estimated at 1.1 and tax rate is 30%.

Scenario A: The company is contemplating a change in capital structure to 42% debt and 58% equity. Pre-tax cost of debt would rise to 6% (because there is more debt outstanding).

Base case: What is the current WACC of the company under the base case scenario: a. 12.5% b. 9.4% c. 9.0%.

Reference no: EM133182998

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