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You are considering opening a luxury apparel store. You have identified luxury designer firm Pucci as a firm closest to your line of business Assume
You are considering opening a luxury apparel store. You have identified luxury designer firm Pucci as a firm closest to your line of business Assume that Pucci has an equity beta of 20 the risk-free rate is 2% and market risk premium is 7% Assume that Poco has 5100 million in equity and $150 million in BB rated debt that has a 20% percent chance of default. When Pucci defaults on its debt, the loss rate is expected to be 40% The yield on Pucci's BB rated debt is 21%. Suppose Pucci has $20 million in cash on its balance sheet as wel. A Given this informtion, what is your estimate for Pucci's equity cost of capital? B. Given this information what is your estimate for Pucc's debt cost of capital? C. Given this information what should be your estimate for cost of capital for your new apparet store
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