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CoffeeCarts has a cost of equity of 15% (calculated assuming a classical tax system), an after-tax cost of debt of 4%, and is financed 70%
CoffeeCarts has a cost of equity of 15% (calculated assuming a classical tax system), an after-tax cost of debt of 4%, and is financed 70% with equity and 30% with debt. The corporate tax rate is 30%. What is this firm's weighted average cost of capital: a. assuming that investors cannot utilise franking credits generated by the firm (y = 0)? b. assuming that investors can utilise 50% of the franking credits generated by the firm (y = 0.5)? c. assuming that investors can fully utilise franking credits generated by the firm (y = 1)?
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