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Calculate weight average cost of capital using classic capm

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Reference no: EM132600632

Question 1: Consider a company that has equity = 1.5 and debt = 0.4. Suppose that the risk-free rate of interest is 6 percent, the expected return on the market E(r M ) = 15 percent, and the corporate tax rate is 40 percent. If the company has 40 percent equity and 60 percent debt in its capital structure, calculate its weighted average cost of capital using both the classic CAPM and the tax- adjusted CAPM.

Reference no: EM132600632

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