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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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