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A firm has zero debt in its capital structure. Its overall cost of capital is 8%. The firm is considering a new capital structure with
A firm has zero debt in its capital structure. Its overall cost of capital is 8%. The firm is considering a new capital structure with 50% debt. The interest rate on the debt would be 5%. Assuming that the corporate tax rate is 40%, its cost of equity capital with the new capital structure would be?
Group of answer choices
a) 9.2% b)None of the above
c)9.8%
d)11%
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