Question: Assume that B (in Problem 1) is $3 million and S is $7 million. The bonds have a 14 percent yield to maturity, and the

Assume that B (in Problem 1) is $3 million and S is $7 million. The bonds have a 14 percent yield to maturity, and the stock is expected to pay $500,000 in dividends this year. The growth rate of dividends has been 11 percent and is expected to continue at the same rate. Find the cost of capital if the corporation tax rate on income is 40 percent.

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