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= ACME company uses only debt and common equity. It can borrow unlimited amounts at an interest rate of ra = 7% as long as
= ACME company uses only debt and common equity. It can borrow unlimited amounts at an interest rate of ra = 7% as long as it finances at its target capital structure, which calls for 40% debt and 60% common equity. Its last dividend D. was $2.50, its expected constant growth rate is 3% and its common stock sells for $38. ACME's tax rate is 25%. Solve for the cost of equity using the discounted cash flow model, then use that number to find the WACC. 8.26% 8.13% 7.97% 8.68% 8.41%
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