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Your firm is planning to invest in an AI service platform. You decided to look for a comparable company to reduce estimation error in your

Your firm is planning to invest in an AI service platform. You decided to look for a comparable company to reduce estimation error in your cost of capital estimation. You find AIWin which is also engaged in a similar line of business. AIWin has a stock price of $5 per share, with 20 million shares outstanding. It also has $100 million in outstanding debt, with a yield on the debt of 4.5%. AIWins equity beta is 1.20. The risk-free rate is 4%, and the market risk premium is 5%. Now, suppose your company decide to use debt to finance 60% of the investment and cost of debt of 5%, what is the weighted average cost of capital of your company? Assume marginal tax rate equals to 40%.

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