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A firm has the following capital structure. The corporate tax rate is 21%. Determine the after-tax weighted average cost of capital for the firm. begin{tabular}{|l|r|r|r|}
A firm has the following capital structure. The corporate tax rate is 21%. Determine the after-tax weighted average cost of capital for the firm.
\begin{tabular}{|l|r|r|r|} \hline \multicolumn{1}{|c|}{ Type } & \multicolumn{1}{c|}{ Amount } & Return & Weight \\ \hline Mortgages (debt) & 25,000,000 & 0.05 & 0.068 \\ \hline Bonds & 200,000,000 & 0.08 & 0.000 \\ \hline Common Stock & 175,000,000 & 0.1 & 0.473 \\ \hline Preferred Stock & 50,000,000 & 0.08 & 0.135 \\ \hline Retained Earnings & 120,000,000 & 0.12 & 0.324 \\ \hline \end{tabular}Step by Step Solution
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