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Q 4 : WXB Inc., whose tax rate is 2 5 % , has 6 . 5 MM preferred shares outstanding, priced at $ 1

Q4: WXB Inc., whose tax rate is 25%, has 6.5 MM preferred shares outstanding, priced at $ 15(dividend= $ 1.25), and 80 MM common shares outstanding, priced at $ 14. Its debt structure is split between LT bonds (10-year bonds, coupon rate =6%, issue/quoted price =$ 920) and debt, totaling $ 120 MM and $ 150 MM, respectively. WXB Inc.'s stock beta is 1.5, and the underlying stock market's return =10%. If the risk-free rate =4%, what is WXB Inc.'s weighted average cost of capital? Q5: WXB Inc. reports the following cash flows: Using a 4-year planning horizon, and the cost of capital computed in Q4, what is the value of WXB Inc.'s business (assume a constant growth rate after year 4=4%)?

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