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A firm has a capital structure ratio of 60/40. The risk-free rate is 2%, the expected market return is 10%, and the tax rate is

A firm has a capital structure ratio of 60/40. The risk-free rate is 2%, the expected market return is 10%, and the tax rate is 24%. The current cost of equity is 11%. What is the estimated cost of equity if the firm changed its capital structure ratio to 40/60?

7.7%

8.3%

7.1%

8.0%

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