Question
Bluegrass Mint Company has a debt-equity ratio of 0.4. The required return on the company's unlevered equity is 14.1% and the pretax cost of the
Bluegrass Mint Company has a debt-equity ratio of 0.4. The required return on the company's unlevered equity is 14.1% and the pretax cost of the firm's debt is 6.7%. Sales revenue for the company is expected to remain stable indefinitely at last year's level of $21,169,991.8. Variable costs amount to 58% of sales. The tax rate is 32% and the company distributes all its earnings as dividends at the end of each year.
What is the Weighted Cost of Capital?
HINT: You will need the return of Levered Equity. Follow the process that you used to determine the answer to the previous problem
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