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QUESTION
A firm has a cost of equity of 10% with an EBIT of a 100, which currently has no debt. Looking to find the new cost of equity if they changed to...
A firm has a cost of equity of 10% with an EBIT of a 100, which currently has no debt. Looking to find the new cost of equity if they changed to using a capital structure with 40% debt and 60% equity. The interest rate on the debt is 4%, while the tax rate is 35%.
