Armani is a firm manufacturing perfumes and other cosmetics and it sells its products worldwide

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Armani is a firm manufacturing perfumes and other cosmetics and it sells its products worldwide. you are provided the following information –
·         The long-term treasury bond rate is 6%.
·         The market risk premium is 5.5%
·         There are 10 million shares outstanding, trading at $ 40 per share currently; the stock has been traded for only two years. A regression of stock returns against market returns yields a beta of 0.9, with a standard error of 0.8.
·         The debt on the balance sheet has two components. The first is traded bonds, with ten years to expiration and a coupon rate of 7%; there are 50,000 bonds outstanding, trading at $ 850 apiece (the face value is $ 1000). The second is $50 million in bank debt, which also has a ten year maturity, and carries an interest rate of 6%. With a market value of $39.5 million
·         the marginal tax rate is 40%

a. Estimate the cost of equity for Armani Inc.
b. Estimate the market value of debt and the after-tax cost of debt for Armani Inc.
c. Estimate the cost of capital for this firm using market value weights.