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A Corporation is issuing a $1,000 par value bond that pays 9% interest annually. Investors are expected to pay $975 for the 10-year bond. The

A Corporation is issuing a $1,000 par value bond that pays 9% interest annually. Investors are expected to pay $975 for the 10-year bond. The investors can expect to pay an additional risk premium of 4.2% on common stock. What is the firm's cost of equity capital?

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