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a) The following table shows the balance sheet for Holiday Homes Ltd. The firm is in the business of renting out holiday homes for short-term

image text in transcribedimage text in transcribed a) The following table shows the balance sheet for Holiday Homes Ltd. The firm is in the business of renting out holiday homes for short-term vacations. The firm's long-term borrowings are secured by its properties owned and short-term borrowings are used as a permanent source of financing. The interest rate on bank debt is 9% per annum and the interest rate charged on secured debt is marginally lower at 8% per annum. The firm has 20 million shares outstanding and the market valued each share at $80 per share. The expected return on its stock is 20%. Determine the weighted average cost of capital, WACC, for Holiday Homes Ltd. The marginal tax rate for Holiday Homes Ltd is 17%. (18 marks)

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