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A US company is planning to issue new shares in the stock market. The risk-free rate is 3% and the expected return on the market
A US company is planning to issue new shares in the stock market. The risk-free rate is 3% and the expected return on the market this year is expected to be 18%.
- If the companys costs of debt is 08%, what is the domestic weighted average cost of capital if it uses 40% debt and the tax rate is 35%? Assume the beta of the stock is 0.8.
- If the global beta is 0.90 and the expected return on a world market portfolio is 16%, what is the weighted average cost of capital if we use the global beta and world market portfolio? Assume the same proportion of debt and tax rate.
- What percent of debt and equity should they hold to have a WACC to be 10.5%, using global beta and the world market portfolio?
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