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You are given the following data about a firm and the financial situation: -The firms desired capital structure is 60% long-term debt and 40% common
You are given the following data about a firm and the financial situation:
-The firms desired capital structure is 60% long-term debt and 40% common equity.
-The firms tax rate is 22%.
-The firms beta is 1.4, and the yield on U.S. Treasury Bills is 5.4%. The average market return based on S&P 500 index funds is about 9.55%.
-The company issued $10,000 bonds with a 14% bond rate with annual payments.
a. What is the firms after-tax cost of debt? b. What is the firms cost of equity? c. What is the firms weighted average cost of capital?
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