## Answers

using ICAPM the cost of equity (1.8 +0.82*(7.8 -1.8)) 6.72 weight of equity (1-0.33) 0.67 Cost of debt = 6% ( we are assuming the credit risk premium is reflected in the current cost) Tax rate 30% weight of debt = 0.33 WACC (6.72 * 0.67 +6*(1-0.3) *0.33) 5.89

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