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If Wild Widgets, Inc., were an all-equity company, it would have a beta of 1. The company has a target debt equity ratio of .2. The expected return on the market portfolio is 10 percent, and Treasury bills currently yield 4.3 percent. The company has one bond issue outstanding that matures in 20 years and has a coupon rate of 7.6 percent. The bond currently sells for $1,110. The corporate tax rate is 34 percent.
a. What is the companys cost of debt? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
b. What is the companys cost of equity? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
c. What is the companys weighted average cost of capital? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
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Jordan wants to retire in fifteen years when he turns 65. Jordan wants to have enough money to replace 75 percent of his current income less what he expects to receive from Social Security at the beginning of each year.
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