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A company has 2 million shares of common stock outstanding and the common stock is currently trading at $10 per share. The current market value of debt is $10 million. The company has not issued preferred shares. The cost of common equity is 12%, the cost of debt is 8%, and the tax rate is 40%. Compute the given company’s weighted average cost of capital (WACC). When is it appropriate to use the company’s overall cost of capital when determining the attractiveness (i.e., the NPV) of a project undertaken by the company?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92845020

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