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Midwest Electric Company (MEC) uses only debt and retained earnings. It can borrow unlimited amounts at an interest rate of rd = 10% as long
Midwest Electric Company (MEC) uses only debt and retained earnings. It can borrow unlimited amounts at an interest rate of rd = 10% as long as it finances at its target capital structure, which calls for 40% debt and 60% common equity. Its last dividend was $2 (i.e., D0 = $2), its expected constant growth rate is 4%, and its common stock sells for $20. MECs tax rate is 40%. What is its WACC?
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