Question: FAST PLEASE Slobe Telecom is considering a project for the coming year that will cost P50 million. Slobe plans to use the following combination of

FAST PLEASE

Slobe Telecom is considering a project for the coming year that will cost P50 million. Slobe plans

to use the following combination of debt and equity to finance the investment:

a. Issue P15million of 20-year bond at a price of 101, with a coupon rate of 8%, and floatation costs of

2% par.

b. Use P35M of funds generated from earnings. The equity market is expected to earn 12%. US

treasury bonds are currently yielding 5%. The beta coefficient of Slobe is estimated to be .60. Slobe is

subject to an effective tax rate of 40%.

CALCULATE CAPM, WACC, AND BEFORE TAX COST OF DEBT

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