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89/100 97/100 98/100 1. Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield
89/100 97/100 98/100 1. Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 9%, and its tax rate is 40%. The beta of the firm is 1.05, with risk-free rate of 3%, and market risk premium of 5%. a. What is the after-tax cost of debt? b. What is the cost of equity? c. Calculate the company's WACC.
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