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Dubai Corporation has issued 35,000 bonds with a market price of $100 per bond. The firm also has 50,000 common shares outstanding at a price
Dubai Corporation has issued 35,000 bonds with a market price of $100 per bond. The firm also has 50,000 common shares outstanding at a price of $65 per share. If the common shares will pay a dividend of $2.50 at the end of the year and thereafter dividends will grow at a rate of 3%. If the after-tax yield on the firm's bonds is 6%. Required: a. Define the firm's weighted average cost of capital (1 mark) b. What is the firm's weighted average cost of capital?(4 marks)
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