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A company expects its annual EBIT to be Rs. 50,000 . The company has Rs. 200,000 in 10% bonds and the cost of equity is

A company expects its annual EBIT to be Rs. 50,000 . The company has Rs. 200,000 in 10% bonds and the cost of equity is 12.5(ke)%. The firm decides to retire $100,000 worth of equity by using the proceeds of new debt issue worth the same amount. Will the cost of capital lower with increase in leverage?

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