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Cornish Pixy Inc. is financed with $40 million of (risk-free) debt and $80 million of common stock, which has a beta of 1.6. The risk-free
Cornish Pixy Inc. is financed with $40 million of (risk-free) debt and $80 million of common stock, which has a beta of 1.6. The risk-free rate is 6%, and the expected return on the market portfolio is 15%. If the company issues $40 million more common stock and uses the proceeds to buy back all the outstanding debt, the cost of equity capital will be: a. 6.0% b.20.4% c. 19.0% d. 15.6% e. 14.2% O f. Other, specify
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