5. Again referring to Willerton of the two previous problems, assume the firms cost of retained earnings

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5. Again referring to Willerton of the two previous problems, assume the firm’s cost of retained earnings is 11% and its marginal tax rate is 40%. Calculate its WACC using its book-value–based capital structure ignoring flotation costs. Make the same calculation using the market-value–based capital structure. How significant is the difference?

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