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Problem #2 (10 marks) Fitness Depot has earnings before interest and taxes of $265,000. The unlevered cost of equity is 12.5%. The book value and

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Problem #2 (10 marks) Fitness Depot has earnings before interest and taxes of $265,000. The unlevered cost of equity is 12.5%. The book value and market value of debt are the same at $375,000 and the before tax cost of debt is 6%. If the tax rate is 35% and there is no cost of financial distress, what is the weighted average cost of capital of Fitness Depot

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