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The market value of debt is $425 million and the total market value of the firm is 5925 million. The cost of cquity is 17%, t
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Answer #1

D = $425 million

E = $925 million

re = 17%

rd = 10%

tax = 35%

WACC = \frac{D}{D+E}*r_{d}*(1-t) + \frac{E}{D+E}*r_{e}

WACC = \frac{425}{425+925}*0.10*(1-0.35) + \frac{925}{425+925}*0.17

WACC = 0.3148148148*0.10*0.65 + 0.6851851852*0.17

WACC = 0.1369444444

WACC = 13.69444444\%

WACC = 13.70%

Option C is correct: 13.78%

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