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Suppose the market values of common stock, long-term debt, and preferred stock are $50 billion, $15 billion, and $10 billion, respectively, for Company XYZ. The pretax cost of common stock is 10%, pretax cost of debt is 8%, and the pretax cost of preferred stock is 7%. Estimate the WACC for the Company XYZ given that its effective tax rate is 25%. Show work.

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Financial Management, Finance

Category:- Financial Management
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