A firm’s stockholders expect an 12% rate of return, and there is $20M in common stock and retained earnings. The firm has $7M in loans at an average rate of 9%. The firm has raised $12M by selling bonds at an average rate of 5%. What is the firm’s cost of capital: (a) Before taxes? (b) After taxes with a tax rate of 24%?

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Q: 20f

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A: Information povided

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