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Corporate Finance

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Calculating a Firm's Cost of Equity

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A company's CFO wants to maintain a target debt ratio of 40%.

If its WACC is 13.2%, and the pre-tax cost of debt is 5.8%, what is the cost of common equity assuming a tax rate of 34%?

A

25.87%

B

24.55%

C

20.47%

D

19.45%