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Below is information provided for two companies, A and B. Assuming a risk-free rate of 2.5%, an effective tax rate of 40%, and a market risk premium of 5.5%, estimate the Weighted Average Cost of Capital (or WACC) for companies A & B.

Company A Company B

Beta 0.86 0.78

Credit rating AA A

Cost of debt

(before-tax) 6.885% 7.125%

Debt to total

Capital 34% 41%

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Category:- Basic Finance
Reference No.:- M9523978

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