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A firm has determined its target capital structure as having 46% of its assets financed with debt and the remaining with equity. However, the debt
A firm has determined its target capital structure as having 46% of its assets financed with debt and the remaining with equity. However, the debt is split evenly between a bank term loan bearing an interest cost of 8.8% and bonds that have a yield to maturity of 11.7%. If shareholders in the firm demand a 18.7% return on their investment and the tax rate is 30% what is the firm's cost of capital?
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