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Cost of equity for a firm based on its current capital structure is 15%. cost of debt is 8% with a debt to equity ratio
Cost of equity for a firm based on its current capital structure is 15%. cost of debt is 8% with a debt to equity ratio of 0.4. debt equity ratio of 1. The cost of debt is expected to go up to 9% given the increase in risk due to higher leverage. What is the new expected return that the equity holders will demand of this firm if the prevailing tax rate is 20%?
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