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Burlees Inc.'s CFO has collected the following information to calculate its WACC: The company's capital structure consists of 40% debt and 60% common stock. The
Burlees Inc.'s CFO has collected the following information to calculate its WACC:
| The company's capital structure consists of 40% debt and 60% common stock. | |
| The company has 25-year, 12% annual coupon bonds that have a face value of $1,000 and sell for $1,252. | |
| The company uses the CAPM to calculate the cost of common stock. Currently, the risk-free rate is 5% and the market risk premium is 6%. The company's common stock has a beta of 1.6. | |
| The company's tax rate is 40%. | |
What is the company's cost of common equity?
| 9.65% | ||
| 14.00% | ||
| 14.60% | ||
| 17.60% | ||
| 18.91% |
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The Laymans Guide To Managing Your Investments
Authors: Thomas Dunleavy
1st Edition
979-8763592214
