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1. Company FHL has the following information: Targeted Capital Structure 60% Debt, 40% Equity Before Tax Cost of Debt 12% Tax Bracket 30% Current Risk-Free

1. Company FHL has the following information:

Targeted Capital Structure 60% Debt, 40% Equity

Before Tax Cost of Debt 12%

Tax Bracket 30%

Current Risk-Free Rate 5%

Expected Market Return 11%

FHL Stock Beta 1.7

a. Determine JKLs Cost of Debt, Return on Common Equity, and WACC.

b. If they could should JKL change its Targeted Capital Structure? Why? Or Why Not?

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