ABC's current capital structure is comprised of 60% debt and 40% equity (based on market values)....
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ABC's current capital structure is comprised of 60% debt and 40% equity (based on market values). ABC's equity beta (based on its current level of debt financing) is 1.20, and its debt beta is 0.1. Also, the risk-free rate of interest is currently 4.5% on long-term government bonds. The after-tax cost of debt is 6%. ABC's investment banker advised the firm that, according to her estimates, the market risk premium is 7%. If ABC's marginal tax rate is 30%, what is the firm's overall weighted average cost of capital (WACC)? O A. 7.68% O B. 8.76% C. 8.68% O D.9.76% ABC's current capital structure is comprised of 60% debt and 40% equity (based on market values). ABC's equity beta (based on its current level of debt financing) is 1.20, and its debt beta is 0.1. Also, the risk-free rate of interest is currently 4.5% on long-term government bonds. The after-tax cost of debt is 6%. ABC's investment banker advised the firm that, according to her estimates, the market risk premium is 7%. If ABC's marginal tax rate is 30%, what is the firm's overall weighted average cost of capital (WACC)? O A. 7.68% O B. 8.76% C. 8.68% O D.9.76%
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