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A firm's unlevered cost of capital is 8%. The firm has a market value of equity of $16 million and $6 million in outstanding debt at an interest rate of 4%. The corporate tax rate is 40%. What is the firm's cost of equity? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit the % sign in your response. For example, an answer of 15.39% should be entered as 15.39.)

A firm's unlevered cost of capital is 8%. The firm has a market value of equity of $16 million and $6 million in outstanding debt at an interest rate of 4%. The corporate tax rate is 40%. What is the firm's cost of equity? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit the % sign in your response. For example, an answer of 15.39% should be entered as 15.39.)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A firm's unlevered cost of capital is 8%. The firm has a market value of equity of $16 million and $6 million in outstanding debt at an interest rate of 4%. The corporate tax rate is 40%. What is the firm's cost of equity? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit the % sign in your response. For example, an answer of 15.39% should be entered as 15.39.) Numeric Response
Transcribed Image Text:A firm's unlevered cost of capital is 8%. The firm has a market value of equity of $16 million and $6 million in outstanding debt at an interest rate of 4%. The corporate tax rate is 40%. What is the firm's cost of equity? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit the % sign in your response. For example, an answer of 15.39% should be entered as 15.39.) Numeric Response
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