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 stocks is 9%, and the marginal tax rate is
25%. What is the firm's composite cost of capital? Please provide explanation to the answer.
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Sep 21, 2019EXPERT
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