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A firm has a 25% debt-to-equity ratio. The cost of debt is 6%. The companys asset beta is 1.4. Assume CAPM holds, the risk-free interest

A firm has a 25% debt-to-equity ratio. The cost of debt is 6%. The companys asset beta is 1.4. Assume CAPM holds, the risk-free interest rate is 4% and market risk premium is 4%. The corporate tax rate is 35%. Interest payments on debt are tax exempt; dividends to shareholders are paid from after-tax funds.

What is the weighted average cost of capital (WACC) for this firm A. 6.92% B. 9.58% C. 9.23% D. 6.86%

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