Equity with market value-weighted average cost of capital

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ABC corp. has equity with a market value of $750 million, debt with a market value of $330 million, and future operating lease commitments with a present value of $400 million. The firm also has a Beta of 1.2, a pre-tax cost of debt of 8%, and a marginal tax rate of 38%. What is the firm’s weighted average cost of capital if the long-term treasury rate is 4.5% and the market risk premium is 4%?

Reference no: EM13947209

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