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Ganado and Equity Risk Premiums. Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk - free rate to be 3 . 5 0 % ,

Ganado and Equity Risk Premiums. Maria Gonzalez, Ganado's Chief Financial Officer, estimates the risk-free rate to be 3.50%, the company's credit risk premium is 4.50%, the domestic beta is estimated at 0.97, the international beta is estimated at 0.73, and the company's capital structure is now 75% debt. The before-tax cost of debt estimated by observing the current yield on Ganado's outstanding bonds combined with bank debt is 7.90% and the company's effective tax rate is 35%. Calculate both the CAPM and ICAPM weighted average costs of capital for the following equity risk premium estimates.
a.8.00%
b.6.90%
c.4.90%
d.4.00%
a. Using the domestic CAPM, what is Ganado's weighted average cost of capital if the firm's equity risk premium is 8.00%?
%(Round to two decimal places.)
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