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Problem:

A company you are researching has common stock with a beta of 1.4. Currently, Treasury bills yield 3.6%, and the market portfolio offers an expected return of 13.8%. The company finances 45% of its assets with debt that has a yield to maturity of 6%. The firm also uses preferred stock to finance 15% of its assets. The preferred stock has a current price of $12 per share and pays a level $2 dividend. The firm is in the 34% tax bracket.

Required:

Question: What is the weighted average cost of capital?

Note: Show supporting computations in good form.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167177

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