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Example: Ralley, Inc. has a target capital structure of 70% equity and 30% debt. The firm has bonds outstanding that have ten years to maturity,
Example: Ralley, Inc. has a target capital structure of 70% equity and 30% debt. The firm has bonds outstanding that have ten years to maturity, a coupon rate of 10%, and currently sell for $985 per $1000 of face value. The risk-free rate is 3%, and the expected return on the S&P 500 is 10%. The firm pays taxes at the rate of 21% and their stock has an estimated beta of 1.2. Estimate Ralleys WACC.
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