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Marathon Inc. is a privately held company that would like to estimate its WACC. Indetermining its cost of retained earnings.
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Answer #1

Marathon’s cost of retained earnings using Bond Yield plus risk premium approach

Marathon’s cost of retained earnings using Bond Yield plus risk premium approach = Marathon’s Bond Yield + Marathon’s Risk Premium

= 6.75% + 5.25%

= 12.00%

“Hence, the Marathon’s cost of retained earnings using Bond Yield plus risk premium approach will be 12.00%”

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