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14. Tollgate Inc. is expected to pay a $2.50 dividend at year end (D1=$2.50), the dividend is
expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for
$37.50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital
structure consists of 45% debt and 55% common equity. What is the company's WACC if all the
equity used is from retained eamings? Do not round your intermediate calculations.

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