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A firm currently has a cost of equity (i.e., a required return on its equity) of 18%. It has no debt outstanding, but bankers have
A firm currently has a cost of equity (i.e., a required return on its equity) of 18%. It has no debt outstanding, but bankers have offered to lend to it at an interest rate of 10%, as long as it maintains a debt-to-value ratio no greater than .3. What would the firm's new cost of equity be if it borrows up to this amount of debt
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