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Suppose Microsoft has no debt and a WACC of 9.2%. The average debt-to-value ratio for the software industry is 9.6%. What wou

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Answer #1

Equity (levered):

= Ru+(D/E)×(Ru-Rd)

= 9.2%+($9.6/$90.4)×(9.2%-5.8%)

= 9.2%+36%

= 9.56%

Hence, levered cost of equity is 9.56%

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Answer #2

where are you getting the 90.4 from?

source: textbook
answered by: mike
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