A firms stockholders expect an 18% rate of return,and

Chapter , Problem 15-5

(choose chapter or problem)

A firms stockholders expect an 18% rate of return,and there is $22M in common stock and retainedearnings. The firm has $9M in loans at an averagerate of 8%. The firm has raised $14M by sellingbonds at an average rate of 4%. What is the firmscost of capital:(a)Before taxes?(b)After taxes with a tax rate of 34%?

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