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Rumolt Motors has 12 million shares outstanding with a price of $26 per share. In addition, Rumolt has issued bonds with a total current market
Rumolt Motors has 12 million shares outstanding with a price of $26 per share. In addition, Rumolt has issued bonds with a total current market value of $390 million. Suppose Rumolt's equity cost of capital is 15%, and its debt cost of capital is 7%. a. What is Rumolt's pretax weighted average cost of capital? b. If Rumolt's corporate tax rate 40%, what is its after-tax weighted average cost of capital
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