Question
Consider following information about a company: The risk-free rate is 1 percent The market risk premium is 9 percent The stocks beta is 1.1 The
Consider following information about a company:
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The risk-free rate is 1 percent
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The market risk premium is 9 percent
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The stocks beta is 1.1
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The companys bonds mature in 20 years, have a 5 percent annual coupon, a par value of $100 and a market price of $100
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The companys tax rate is 31 percent
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The target capital structure consists of 0.55 percent debt and the balance is common equity
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The company uses the capital asset pricing model to estimate the cost of equity, and it does not expect to issue any new common stock
What is the companys weighted average cost of capital?
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