A firm's current capital structure consists of 50 percent debt and 50 percent common stock....
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Accounting
A firm's current capital structure consists of 50 percent debt and 50 percent common stock. The firm's before-tax cost of debt is 6 percent, its tax rate is 40 percent, and its cost of common stock is 11 percent (based on CAPM). Further, the risk-free rate is 4 percent and that the market risk premium is 5 percent. Calculate the firm's new weighted average cost of capital if it changes to a capital structure of 20 percent debt and the balance is equity. e 7.8375% o 7.7300% 7.5150% 07.6225% O 7.9450%
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