The after-tax cost of debt of Company XYZ Ltd is 4.5%. The systematic risk of its equity is twice the market. The risk-free interest rate is 5% per annum. Rate of return on market portfolio is 7%...

The after-tax cost of debt of Company XYZ Ltd is 4.5%. The systematic risk of its equity is twice the market. The risk-free interest rate is 5% per annum. Rate of return on market portfolio is 7% (assume franking premium = 0). 35% of the firm’s funding comes from debt and the rest comes from equity. Compute the cost of capital of this company.