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QUESTION
Blue Mountain Inc. has the cost of equity of 12% and the cost of debt of 6%. The firm's corporate tax rate is 40%, and the debt-equity ratio is 0.
Blue Mountain Inc. has the cost of equity of 12% and the cost of debt of 6%. The firm's corporate tax rate is 40%, and the debt-equity ratio is 0.5. Assume that Blue Mountain maintains a constant debt-equity ratio. Calculate Blue Mountain's unlevered cost of capital and WACC respectively.
