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Your assignment is to determine the cost of capital for RC Ontario. The company has a tax rate of 40% and 100,000 common shares. The
Your assignment is to determine the cost of capital for RC Ontario. The company has a tax rate of 40% and 100,000 common shares. The estimated beta for the common stock is 3. The expected return of the market is 5%, and the risk-free rate is also 1%. RC Ontario recently issued a dividend of $2 per share, with a projected 15% growth in dividends until Year 4, followed by a consistent 5% growth thereafter. You will use the CAPM approach to calculate the cost of equity. Additionally, the company has two outstanding debt issues. The first issue consists of 1,000 semi-annual coupon bonds, each with a face value of $1,000, an annual coupon rate of 10%, and currently trading at a YTM of 10%. The second issue comprises 1,000 zero coupon bonds, each with a face value of $1,000, trading at 60% of their face value, and maturing in 10 years. Your task is to calculate the weighted average cost of capital for RC Ontario based on the provided information
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