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What is the Weighted Average Cost of Capital

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Question - A firm $70 of debt and $30 of equity in its capital structure. The beta of the firm's equity is 0.55 and the market risk premium is 12%. The debt of the firm is in the form of semi-annual public market bonds, with face value of $1000, maturing in 10-years. The coupon rate for this debt is 10% and it is currently traded at $970 in the market. Risk free rate is 5% and tax rate is 40%

Required -

1. What is the firm's cost of equity?

2. What is the firm's cost of debt?

3. What is the Weighted Average Cost of Capital (WACC)?

Reference no: EM133065716

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