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Davola, Inc. has a target capital structure of 50% debt and 50% common equity. Davola funds debt by issuing 20-year, 6.4% semi-annual coupon bonds that
Davola, Inc. has a target capital structure of 50% debt and 50% common equity. Davola funds debt by issuing 20-year, 6.4% semi-annual coupon bonds that currently sell for $925. The risk-free rate (rRF) is 4%, Davolas beta is 1.5 and their estimated market risk premium is 7%. Dovolas tax rate is 40%. What is Davolas after-tax, component cost of debt? What is Davolas component cost of equity? What is Davolas WACC?
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