Dusit is financed 30 by debt yielding 8 investors require a


Leverage and the Cost of Capital:

Dusit is financed 30% by debt yielding 8%. Investors require a return of 15% on Dusit's equity.

a. What is the company's weighted-average cost of capital if the corporate tax is 35%?

b. What would be the company's cost of capital if it were exempted from corporate tax?

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