Market value of Equity = 20* 15 = 300 million
Market value of Debt = 120 million
Total Value = 300+120 = 420
Cost of capital = Equity/Value * Cost of Equity + Debt/Value * Cost
of Debt*(1-Tax rate) = 300/420 * 10% + 120/420*4%*(1-40%) =
7.83%
none of these
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