Shares of the Pacific Electric Company (PEC) have an estimated Beta of 1.10. PEC funds its assets with 50 percent debt at an average after-tax cost of debt of 6 percent. The excess return of the market portfolio is 5 percent and the risk-free rate is 3 percent. Question A. what is PEC's estimated cost of equity according to the CAPM? Question B. what is PEC's estimated weighted average cost of capital?

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