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Q1. a) Discuss market risk. b) Gammon Ltd has a WACC of 17%. The company cost of equity is 22% and its pretax cost of

Q1. a) Discuss market risk.

b) Gammon Ltd has a WACC of 17%. The company cost of equity is 22% and its pretax cost of debt is 20%. The tax rate is 40%. What is the target debt-equity ratio?

Also compute weight of debt and equity respectively. Moreover compute unlevered beta.

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