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Unfortunately, the company has fallen on hard times. The 5 million shares are trading for only $4 apiece and the market value of its debt securities is 20% below face (book) value. Because of the comapny's large cumulative, it will pay no taxes on future income. Suppose shareholders now demand a 20% expected rate of return. The bonds are now yeilding 14%. What is the firm's weighted average cost of capitial if the firm's tax rate is 40%?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91939510

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