Question: Could you help giving me explanations on this problem ? Thank you. XYZ Corporation has 50 million shares outstanding trading for $15 per share. Moreover,

Could you help giving me explanations on this problem ? Thank you.

XYZ Corporation has 50 million shares outstanding trading for $15 per share. Moreover, XYZ Corp. also has $200 million in outstanding debt (corporate bonds). Suppose XYZ's bonds have a beta of 0.3, and its corporate tax rate is 35%. Assume the current risk-free rate is 3% and you expect the market risk-premium to be 5%. (a) Estimate XYZ's equity cost of capital using following data about XYZ's past stock returns: year market excess return XYZ excess return 2019 3% 3.6% 2020 -20% -24% (b) Compute XYZ's debt cost of capital (pre-tax). (c) Compute XYZ's unlevered cost of capital (pre-tax). (d) Compute XYZ's weighted average cost of capital (after-tax)

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