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SMC Inc. has 80 semi-annual bonds outstanding that are selling at $1,012 each. The coupon rate is 3%. The maturity is 25 years. The firm

  1. SMC Inc. has 80 semi-annual bonds outstanding that are selling at $1,012 each. The coupon rate is 3%. The maturity is 25 years. The firm has 5,000 shares of common stock outstanding at a market price of $20 a share. The stock has a beta of 1.3. The U.S. T-bill is yielding 4 percent. The market risk premium is 8 percent. If the tax rate is 21 percent, what is the weighted average cost of capital, assuming all interest is tax deductible?

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