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The total market value of the common stock of the Johnson-Johnson Company is $10 million, and the total value of its debt is $9 million.
The total market value of the common stock of the Johnson-Johnson Company is $10 million, and the total value of its debt is $9 million. The treasurer estimates that the beta of the stock is currently 0.9 and that the expected risk premium on the market is 7%. The Treasury bill rate is 3%. The company tax rate is 20%. Similar companies have a bond rate of 5%.
Estimate the company cost of capital.
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