Montero Incorporated has a target capital structure of 45% debt and 55% equity. The firm is planning to invest in a new project that will require raising new capital. New bonds will be issued at a before-tax yield of 18%. The equity will be provided by internally generated funds so that no new outside equity will be issued. If the cost of common equity is 25% and the corporate tax rate is 35%.

Compute the firm's weighted average cost of capital (WACC).

Answer rating: 100% (QA)

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