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What is the weighted average cost of capital for this firm

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Reference no: EM132950270

Question - A firm has a 25% debt-to-equity ratio. The cost of debt is 6%. The company's asset beta is 1.4. Assume CAPM holds, the risk-free interest rate is 4% and market risk premium is 4%. The corporate tax rate is 35%. Interest payments on debt are tax exempt; dividends to shareholders are paid from after-tax funds. What is the weighted average cost of capital (WACC) for this firm?

A. 6.92%

B. 9.58%

C. 9.23%

D. 6.86%

Reference no: EM132950270

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