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Dye Industries currently uses no debt, but its new CFO is considering changing the capital structure to 40.0% debt (w d) by issuing bonds and

Dye Industries currently uses no debt, but its new CFO is considering changing the capital structure to 40.0% debt (w d) by issuing bonds and using the proceeds to repurchase and retire common shares so the percentage of common equity in the capital structure (w c) = 1 w d. Given the data shown below, by how much would this recapitalization change the firm's cost of equity, i.e., what is r L r U? Risk-free rate, rRF 6.00% Tax rate, T 40% Market risk premium, RPM 4.00% Current wd 0% Current beta, bU 1.15 Target wd 40%

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