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A publicly-held corporation has a total debt of 12 million with an average interest cost of 15%. The company has outstanding 1 million shares of

A publicly-held corporation has a total debt of 12 million with an average interest cost of 15%. The company has outstanding 1 million shares of common stock, currently traded at a price of 10/share in Borsa stanbul. The company is subject to a 20% corporate tax rate.

a. If the risk-free rate of interest (current yield on short-term T-bills) is 8%, the stock market is expected to return 18% next year and the company's estimated (CAPM) beta is 1.5, what is the required rate of return on its equity?

b. Calculate the company's weighted average cost of capital.

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