Question
ABC Corp. has earnings before interest and taxes of $265,000. The unlevered cost of equity is 12.5%. The book value and market value of debt
ABC Corp. has earnings before interest and taxes of $265,000. The unlevered cost of
equity is 12.5%. The book value and market value of debt are the same at $375,000 and
the before tax cost of debt is 6%. If the tax rate is 35% and there is no cost of financial
distress, what is the weighted average cost of capital of ABC Corp.?
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International Financial Management
Authors: Cheol Eun, Bruce G. Resnick
8th edition
125971778X, 978-1259717789
