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An unlevered corporation has a value of $120 million and cost of equity of 9%. An identical but levered corporation has $30 million in debt
An unlevered corporation has a value of $120 million and cost of equity of 9%. An identical but levered corporation has $30 million in debt and a 4.5% cost of debt. Assuming a corporate tax rate of 40%, what is the cost of equity of the levered corporation? (Assume no bankruptcy costs and no personal taxes)
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