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Composite cost of capital

A firm plans to raise $4 million by borrowing at an interest rate of 16% and to raise $1 million by issuing common stock. The firm's stock has a beta coefficient of 2, the risk free interest rate is 6%, the average rate of return on stock is 9% and the marginal tax rate is 25%.

What is the firm's composite cost of capital?

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What is the firm's composite cost of capital?

Step 1:

Cost of equity= Risk free ...

$2.19