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plz help with homework 2. SAP Inc. is assessing its cost of capital under various financing arrangements. The company expects to issue new debt at
plz help with homework
2. SAP Inc. is assessing its cost of capital under various financing arrangements. The company expects to issue new debt at par with a coupon rate of 7.5% and to issue new preferred stock with a dividend rate of 15%; par value being $10 per share at $15 a share. The common stock of SAP is currently selling for $35 a share. The expected risk-free rate of interest of this type of security is 6% and the expected market rate of interest is 13%. The beta on SAP's stock is 0.6. SAP's marginal tax rate is 20%. If SAP raises capital using 35% debt, 25% preferred stock, and 40% common stock, what is SAP's cost of capital Step by Step Solution
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