A. 17.2, B. 15.12 C. 12% D. 18.7%
What would be the weighted average cost of capital for Lam Bakery, Inc. under the following conditions:
*The capital structure is 40% debt and 60% equity
*The before-tax cost of debt (which includes flotation costs) is 20% and the firm is in the 40% tax bracket
*The firm's beta is 1.7
*The risk-free rate is 7% and the market risk premium is 6%
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