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What is the firm weighted average cost of capital

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Reference no: EM132421938

Problem: East Lake Computer has the following information:

Common Stocks: 5 million shares outstanding; currently sells for $40 per share and beta is 1.2

Bonds: 100,000 annual-coupon bonds outstanding, the coupon rate is 8% and the par value is $1,000 each; 10 years to maturity and sell for 110 percent of par.

Market risk premium is 10%, T-bills are 2%, and the company's tax rate is 30%. What is the firm's weighted average cost of capital?

Reference no: EM132421938

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