For a particular firm, the value of its debt is $3,000 and the value of its equity
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For a particular firm, the value of its debt is $3,000 and the value of its equity is $3,500. Given the firm’s risk exposure, the unlevered cost of equity capital is 14.50%. The cost of debt is 7.20%. Plot the cost of equity, the weighted average cost of capital (WACC), and the cost of debt against the debt / equity ratio.
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