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You find the following information for a company: A corporationhas 8,000 bonds outstanding with a 12% annual coupon rate (payingsemi-annually), 8 years to maturity, a $1,000 face value, and a$1,250 market price. The company’s 600,000 shares of common stocksell for $25 per share and have a beta of 2. The risk free rate is1%, and the market risk premium is 7%. a) What is the cost of Debt(RD)? b) What is the cost of Equity (RE)? c) What is the capitalstructure weight of equity (wE)? d) What is the capital structureweight of debt (wD)? e) What is the WACC for this firm, if thecorporate tax rate is 40%?
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