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United States Steel Corporation has a stock market Beta of 2.73. It's debt is 10.7 million, and its shareholder's equity is 4.7 million. US Steel

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United States Steel Corporation has a stock market Beta of 2.73. It's debt is 10.7 million, and its shareholder's equity is 4.7 million. US Steel Corp may offer corporate bonds with coupon rates of 5.65%, the risk-free interest rate is typically 5.33%, and the return on the stock market has averaged 10.81%. US Steel Corp wants to pursue a project that will pay off, in one lump sum, $10 million 5 years from today. Assume it wants to maintain a constant debt to equity ratio. a. Calculate the risk-premium (default-premium) for US Steel's stock returns, and calculate the equity cost of financing. b. Assuming that US Steel Corp's marginal tax rate is 20%, calculate the debt cost of financing. C. Using your answers from part a. and b., calculate the weighted average cost of equity/debt financing to determine US Steel Corp's discount rate for new projects. d. Suppose the government needs a project done that will, at the end of 5 years, pay US Steel Corp $10,000,000. If the project requires an initial cost today of $6,500,000, should US Steel take it? Why or why not

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