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AeroFly Airlines, a large airline company, is contemplating purchasing a new fleet of planes. As a member of the finance department, you are tasked to
AeroFly Airlines, a large airline company, is contemplating purchasing a new fleet of planes. As a member of the finance department, you are tasked to calculate the firm's WACC. AeroFly's equity market value is $4,000,000, and the cost of equity is estimated to be 3 percentage points higher than the current 5-year Treasury bond yield, which is at 1.8%. The firm also has debt valued at $2,000,000 in the market, which costs 2.75%, a spread over the LIBOR rate, which is currently at 0.5%. The corporate tax rate is 25%. Determine AeroFly's WACC.
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