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QUESTION
Calculate the weighted average cost of capital for the Luxury Porcelain Company. The book value of Luxury's outstanding debt is $60 million.
2. Calculate the weighted average cost of capital for the Luxury Porcelain Company. The book value of Luxury's outstanding debt is $60 million. Currently, the debt is trading at 120 percent of book value and is priced to yield 12%. The 5 million outstanding shares of Luxury stock are selling for $20 per share. The required return on Luxury's stock is 18 percent. The tax rate is 25 percent.
