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an engineering firm has borrowed $1M at 6%. The stockholders have invested another $1.5M. The firms retained earnings total $1.2M. The return on equity is

an engineering firm has borrowed $1M at 6%. The stockholders have invested another $1.5M. The firms retained earnings total $1.2M. The return on equity is estimated to be 12%. What is the firms cost of capital:

(a) before taxes?

(b) after taxes with a tax rate of 40%?

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