A company is financed 60% by debt and 40% by equity. The pre-tax cost of debt...

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Answer 1

Answer #1

Cost of debt after-tax=10*(1-tax rate)

=10*(1-0.4)=6%

WACC=Respective cost*Respective weight

9.6=(6*0.6)+(0.4*Cost of equity)

Cost of equity=(9.6-3.6)/0.4

=15%

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Answer 2

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