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The effect of tax rate on WACC K. Bell Jewelers wishes to explore the effect on its cost of capital of the rate at which the company pays taxes. The firm wishes to maintain a capital structure of 30% debt, 10% preferred stock, and 60% common stock. The cost of financing with retained earnings is 11%, the cost of preferred stock financing is 9%, and the before-tax cost of debt financing is 8%. Calculate the weighted average cost of capital (WACC) given a tax rate of 35%. The firm's WACC is %. (Round to two decimal places.) A firm raises capital by selling $25,000 worth of debt with flotation costs equal to 3% of its par value. If the debt matures in 15 years and has an annual coupon interest rate of 7%, what is the bond's YTM? The bond's YTM is 1 %. (Round to two decimal places.)
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