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Suppose the companys market-value balance sheet is as follows: ( million) Assets value 140 Debt D = 100 Equity E = 40 Assets value 140
Suppose the companys market-value balance sheet is as follows: ( million) Assets value 140 Debt D = 100 Equity E = 40 Assets value 140 Firm value V = 140 Given that the risk-free rate is 1.5% p.a. and the corporate tax rate is 19%. The beta of the companys equity is estimated to be 1.2. The market risk premium, which is the difference between the market portfolios return and risk-free rate of return, is 4.5%. The companys after-tax weighted-average cost of capital (WACC) is: (a) 2.84% (b) 4.21% (c) 3.89% (d) 1.79%
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