The cost of debt (10 percent), the cost of equity (15 percent), and the tax rate (50

Question:

The cost of debt (10 percent), the cost of equity (15 percent), and the tax rate (50 percent)

are the same for countries A and B. However, A’s capital structure is zero percent debt and 100 percent equity, while B’s capital structure is 50 percent debt and 50 percent equity.

Compare the cost of capital in the two countries.

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