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Question 6 [11 Marks] Exxon is financed with debt, preferred equity, and common equity with market values of R20 million, R10 million, and R40 million,
Question 6 [11 Marks]
Exxon is financed with debt, preferred equity, and common equity with market values of R20 million, R10 million, and R40 million, respectively. The betas for the debt, preferred stock, and common stock are 0.2, 0.5, and 1.1, respectively. If the risk-free rate is 3.72 percent, the market risk premium is 5.71 percent, and both Exxons average and marginal tax rates are 30percent.
Required: What is the companys weighted average cost of capital?
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