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3 (a) Sketch a graph illustrating the relationships between firm leverage and the required returns on equity and debt, and the weighted average cost of

3 (a) Sketch a graph illustrating the relationships between firm leverage and the required returns on equity and debt, and the weighted average cost of capital, according to the Modigliani-Miller no-taxes model. Provide an intuitive explanation of each of the relationships you have illustrated graphically. (190 words).

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