Consider a company that has equity = 1.5 and debt = 0.4. Suppose that the risk-free rate
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Consider a company that has βequity = 1.5 and βdebt = 0.4. Suppose that the risk-free rate of interest is 6%, the expected return on the market E(rM) = 15%, and that the corporate tax rate is 40%. If the company has 40% equity and 60% debt in its capital structure, calculate its weighted average cost of capital using the CAPM model.
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