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7. Your firm is financed 100% with equity and has a cost of equity capital of 9%. You are considering your first debt issue, which
7. Your firm is financed 100% with equity and has a cost of equity capital of 9%. You are considering your first debt issue, which would change your capital structure to
27% debt and 73% equity. If your cost of debt is 5%, what will be your new cost of equity? Assume no change in your firm's WACC due to the change in capital structures.
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