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4 . Company A uses no debt, its beta is 1 . 2 5 and its tax rate is 3 5 % . However, the

4. Company A uses no debt, its beta is 1.25 and its tax rate is 35%. However, the company is changing its capital structure to 25% debt and 75% equity. If the risk-free rate is 3.5% and the expected return on the market is 8.5%, by how much would the capital structure shift increase the firm's cost of equity?
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