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Question 2 Acetate, Inc. has equity with a market value of $ 2 0 million and debt with a market value of $ 1 0
Question
Acetate, Inc. has equity with a market value of $ million and debt with a market value of $
million. Treasury bills that mature in one year yield per year, and the expected return on
the market portfolio over the next year is The beta of Acetate's equity is The firm
pays no taxes.
Required:
a Calculate Acetate's debt to equity ratio. marks
b Calculate Acetate's weighted average cost of capital. marks
c Calculate the cost of capital for an otherwise identical allequity firm. marks
Total marks
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