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1. Consider the following equity and debt information: Equity information Total equity value = 400 million beta = 1.3 market risk premium = 8% risk-free
1. Consider the following equity and debt information:
Equity information
Total equity value = 400 million
beta = 1.3
market risk premium = 8%
risk-free rate = 5%
Debt information
Total bond value = $100 million
current bond price = 1100
coupon rate = 8% (semiannual coupons)
15 years to maturity
tax rate = 20%
The cost of equity is _______%. Round-off to one decimal place. E.g., if 24.67%, input 24.7, NOT 0.2.
2. The after-tax cost of debt is ________%.
Group of answer choices
10.17
7.03
6.87
5.53
8.67
9.46
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