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A firms capital portfolio consists of 15% loans, 15% bonds, 50% common stock, and 20% retained earnings. The loans have an annual before-tax effective rate
A firms capital portfolio consists of 15% loans, 15% bonds, 50% common stock, and 20% retained earnings. The loans have an annual before-tax effective rate of 8%, the bonds have an annual before-tax effective rate of 8%, the common stock has an after-tax cost of capital of 12%, and the firms income tax rate is 40%. What is its after-tax cost of capital?
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