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1. Rocky Mountain Inc. is all-equity-financed. The expected rate of return on the companys shares is 14.75%. A. What is the opportunity cost of capital
1. Rocky Mountain Inc. is all-equity-financed. The expected rate of return on the companys shares is 14.75%.
A. What is the opportunity cost of capital for an average-risk Rocky Mountain investment?
B. Suppose the company issues debt, repurchases shares, and moves to a 38% debt-to value ratio (D/V = 0.38). What will be the companys weighted-average cost of capital at the new capital structure? The borrowing rate is 9.25% and the tax rate is 21%.
PLEASE USES EXCEL FORMULAS. ALSO SHOW STEPS USED. Thank you!
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