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Cost of capital
Example 2.7
Ratt Co has a capital structure as follows.
Cost of capital Book value Market value
% $m $m
Bank loans 8 8.75 8.75
Bonds 12 14 8.75
Ordinary shares 11.50 31.50 52.50
Required:
Calculate Ratt’s WACC. Give your answer to 2 decimal places
37
