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Tri Co. has the following cost of debt structure: The market risk premium is 4.5%, the risk free rate is 3.5%, beta of unleveraged firm

  1. Tri Co. has the following cost of debt structure: The market risk premium is 4.5%, the risk free rate is 3.5%, beta of unleveraged firm is 1.10, Hamadas equation b= bU [1 + (1 - T)(wd/we)]. T=30%.

Please use the above information to answer following questions:

wd

0%

20%

30%

40%

60%

rd

0.0%

9.0%

10.0%

11.0%

13.0%

  1. If the firm uses 60% debt, what is the cost of equity of the firm, based on CAPM model?
  2. What is WACC of the firm?
  3. If FCF0 = 500 million, g=5%, what is the firm value?

Please show work and formulas. Use Excel

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