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Stone Temple Pilots (STP) has 32 million shares outstanding trading for $12 per share. In addition, STP has $100 million in outstanding debt. Suppose STP's
Stone Temple Pilots (STP) has 32 million shares outstanding trading for $12 per share. In addition, STP has $100 million in outstanding debt. Suppose STP's equity cost of capital is 15%, its debt cost of capital is 7%, and the corporate tax rate is 39%.
a. What is STP's unlevered cost of capital?
b. What is STP's after-tax debt cost of capital?
c. What is STP's weighted average cost of capital?
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