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Assume the M&M assumptions hold (no taxes, no default, etc.). Firm U has a debt-equity ratio of zero. The return on firm U 's assets

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Assume the M\&M assumptions hold (no taxes, no default, etc.). Firm U has a debt-equity ratio of zero. The return on firm U 's assets equals 10% and the cost of debt is equal to 5%. An otherwise identical firm M has a debt-equity ratio of D/E=4. What is firm M 's cost of capital? 5% 10% 15% 20% None of the others

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