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LO2 US P12-39. Estimating Cost of Capital Measures US Steel has $2.66 billion in total debt (which approximates its market value). Interest expense for the
LO2 US P12-39. Estimating Cost of Capital Measures US Steel has $2.66 billion in total debt (which approximates its market value). Interest expense for the year was about $176.0 million. The company's market capitalization is approximately $1.74 billion, its market beta is 2.40, and its assumed tax rate is 21%. Assume that the risk-free rate equals 2.1% and the market premium equals 5%. Required a. Estimate US Steel's cost of debt capital. b. What does a beta of 2.40 mean regarding the volatility of US Steel's stock price? c. Estimate US Steel's cost of equity capital. d. Estimate US Steel's weighted average cost of capital
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