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Zorin Industries has a debt-equity ratio of 1.3. Its WACC is 12%, and its cost of...

Zorin Industries has a debt-equity ratio of 1.3. Its WACC is 12%, and its cost of debt is 6%. The corporate tax rate is 35%

What is Zorin’s unlevered cost of equity capital?

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Answer #1

WACC = Wex Ke + Wd x Kd(after tax) 0.12 = (1/2.3) x ke +(1.3/2.3) (0.039) Ke = 22.53% Re = Ra +(Ra-Rd)(D/E)(1-t) Ra = unlever

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