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An unlevered firm has expected earnings of $36,000 and a market value of equity of $400,000. The firm is planning to issue $250,000 of debt

An unlevered firm has expected earnings of $36,000 and a market value of equity of $400,000. The firm is planning to issue $250,000 of debt at 5 percent interest and use the proceeds to repurchase shares at their current market value. Ignore taxes. What will be the cost of equity after the repurchase?

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