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As a consultant to Safety First Inc., you have obtained the following data (dollars in millions). The company plans to pay out all of its
As a consultant to Safety First Inc., you have obtained the following data (dollars in millions). The company plans to pay out all of its earnings as dividends, hence g = 0. Also, no net new investment in operating capital is needed because growth is zero. The CFO believes that a move from zero debt to 22% debt would cause the cost of equity to increase from 10.0% to 15%, and the interest rate on the new debt would be 8.0%. Tax Rate is stable at 38%. What is the new WACC?
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