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For questions 37 40 use the following: Starlight Corporation has accounts payable of $200,000 (a typical amount for the company, non-interest bearing), a bank loan
For questions 37 40 use the following: Starlight Corporation has accounts payable of $200,000 (a typical amount for the company, non-interest bearing), a bank loan of $300,000 at 8% interest rate, a bank loan of $500,000 at 7% interest rate, and equity of $1,400,000. Its income tax rate is 31%. Management estimates the companys cost of equity is 14%. Which cost of capital from questions 38 and 39 gives the most accurate relationship between return on assets and cost of capital
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