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Assume no taxes and bankruptcy costs. Brentwood, Inc. has a WACC of 20%. It can borrow at 8%. Brentwood has a target capital structure of

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Assume no taxes and bankruptcy costs. Brentwood, Inc. has a WACC of 20%. It can borrow at 8%. Brentwood has a target capital structure of 80% equity and 20% debt. The cost of equity is If the target capital structure changes to 40% equity and 60% debt, the cost of equity will be 23; lower 21: lower 23: higher 24: higher 24: lower 21: higher

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