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A corporation has 60,000 shares of common stock outstanding at a market price of $24 per share. The firm has also 4,000 bonds outstanding currently
A corporation has 60,000 shares of common stock outstanding at a market price of $24 per share. The firm has also 4,000 bonds outstanding currently selling for $960 each. The stock beta of the company is 1.25 and the market risk premium is 7.2%. The T-bill rate of return is 4.5%. Assume that the companys cost of debt is 6% and the tax rate is 33%. Estimate the cost of capital.
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