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(30 points) Wild Widgets, Inc. has a beta of 1.3. The company has a target debt-equity ratio of 0.4. The expected return on the market
(30 points) Wild Widgets, Inc. has a beta of 1.3. The company has a target debt-equity ratio of 0.4. The expected return on the market portfolio is 10 percent, and treasury bills currently yield 4 percent. The bond has one bond issue outstanding that matures in 10 years and has a coupon rate of 8%. The bond currently sells for $1080 and pays coupon annually. The corporate tax rate is 34 percent.
a) What is the companys cost of equity?
b) What is the companys after-tax cost of debt?
c) What is the compnays weighted average cost of capital?
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