Question: The Basic Biotech Corporation wants to determine its weighted average
The Basic Biotech Corporation wants to determine its weighted average cost of capital. Its target capital structure weights are 50 percent long-term debt and 50 percent common equity. The before-tax cost of debt is estimated to be 10 percent and the company is in the 30 percent tax bracket. The current risk-free interest rate is 8 percent on Treasury bills. The after-tax cost of common equity capital is 14.5 percent. Calculate the after-tax weighted average cost of capital.
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