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Ganado and Equity Risk Premiums. Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 3.90%, the company's credit risk premium is 4.50%,
Ganado and Equity Risk Premiums. Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 3.90%, the company's credit risk premium is 4.50%, the domestic beta is estimated at 1.14 , the international beta is estimated at 0.81 , and the company's capital structure is now 20% debt. The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is 8.00% and the company's effective tax rate is 42%. Calculate both the CAPM and ICAPM weighted average costs of capital for the following equity risk premium estimates. a. 8.70% b. 7.70% c. 5.50% d. 4.50% a. Using the domestic CAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 8.70% ? \% (Round to two decimal places.)
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