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1)Assuming the pure plays follow target E/D ratio policies, compute an estimate of the unlevered cost of capital for the restaurant business. 2)Assuming the yield

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1)Assuming the pure plays follow target E/D ratio policies, compute an estimate of the unlevered cost of capital for the restaurant business.

2)Assuming the yield to maturity of Abercrombie and Fitchs debt is 8 percent (the beta is zero), the marginal corporate tax rate is 35 percent (for Abercrombie and Fitch and the pure plays), and that Abercrombie and Fitch desire a target debt-to-firm value ratio of 50 percent for its proposed expansion in the restaurant business, compute an estimate of the after-tax weighted-average cost of capital for the restaurant business.

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