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How to find the weight average cost of capital?
Jack's Construction Co. has 90,000 bonds outstanding that are selling at par value. The bonds yield 7 percent. The company also has 3 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. Treasury bill is yielding 4 percent and the market risk premium is 9 percent. Jack's tax rate is 34 percent. What is Jack's weighted average cost of capital?
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