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General Forge and Foundry Corporation aurrently has no debt in its capital structure, but it is considering using some debt and reducing its outstanding equity.

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General Forge and Foundry Corporation aurrently has no debt in its capital structure, but it is considering using some debt and reducing its outstanding equity. The firm's unlevered beta is 1.05, and its cost of equity is 11.93%. Because the firm has no debt in its capital structure, its weighted average cost of capital (WACC) also equals 11.93%. The risk-free rate of interest (r) is 3%, and the market risk premium (RP) is 8.5%. General Forge's marginal tax rate is 35%. General Forge is examining how different levels of debt will affect its costs of debt and equity, as well as its WACC. The f information that follows to analyze its weighted average cost of capital (WACC). Complete the following table Before-Tax D/A E/A Ratio Ratio D/E Ratio Bond Cost of Debt Levered Cost of Rating (ra) Beta (b) Equity () WACC 0.0 1.0 0.2 0.8 0.4 0.6 0.6 0.4 0.8 0.2-. ] c 13.9% 3.78 35.13% 0.00 0.25 0.67 1.50 11.93% 13.37% 15.84% 11.93% 11.75% 1.05 8.1% 8.5% 10.9% 1.51 2.07 12.49%

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