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Archimedes Levers is financed by a mixture of debt and equity. You have the following information about its cost of capital: r E = ?
Archimedes Levers is financed by a mixture of debt and equity. You have the following information about its cost of capital: |
rE | = | ? | % | rD | = | 12 | % | rA | = | ? | % |
betaE | = | 2.0 | betaD | = | ? | betaA | = | ? | |||
rf | = | 10 | % | rm | = | 18 | % | D/V | = | 0.65 | |
Suppose now that Archimedes repurchases debt and issues equity so that D/V = 0.45. The reduced borrowing causes rD to fall to 11%. Calculate the rE, rA, betaE, betaD, and betaA. |
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