Acetate SA has equity with a market value of 20 million and debt with a market value
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Acetate SA has equity with a market value of €20 million and debt with a market value of €10 million. Treasury bills that mature in one year yield 8 per cent per year, and the expected return on the market portfolio over the next year is 18 per cent. The beta of Acetate’s equity is 0.90. The firm pays no taxes.
(a) What is Acetate’s debt–equity ratio?
(b) What is the firm’s weighted average cost of capital?
(c) What is the cost of capital for an otherwise identical all-equity firm?
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Related Book For 
Corporate Finance
ISBN: 9780077173630
3rd Edition
Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe
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