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1. Briefly explain (in your own words) what a company's weighted average cost of capital is. (20 pts.) 2. When we calculate a company's cost
1. Briefly explain (in your own words) what a company's weighted average cost of capital is. (20 pts.) 2. When we calculate a company's cost of debt, why do we often multiply it by: (1 Tax Rate)? (20 pts) 3. Name two ways for calculating the cost of equity. (20 pts) 4. If a company's capital is composed of 60% equity and 40% debt, and cost of equity equals 8%, cost of debt equals 10%, and the tax rate is 21%, what is the company's Weighted Average Cost of Capital? (20 pts) 5. If a company with a tax rate of 21% has cost of equity of 5%, cost of debt of 8%, and cost of preferred stock of6%, what would be the ideal capital structure? PLEASE EXPLAIN YOUR REASONING. Any problems with this? (20 pts)
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