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Blue Inc has a debt equity ratio of 0 . 4 . The firm also has 4 0 % dividend payout ratio, a beta of

Blue Inc has a debt equity ratio of 0.4. The firm also has 40% dividend payout ratio, a beta of 1.2 and a tax rate of 40%. Given this information, which of the following statements is correct? The aftertax cost of debt will be greater than the current yield-to-maturity on the firm's bonds. The firm's cost of preferred is most likely less than the firm's actual cost of debt. The firm's cost of equity is unaffected by a change in the firm's tax rate. The firm's weighted average cost of capital will remain constant as long as the capital structure remains constant.

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