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Gleckman Inc. currently has no debt financing and exists in a world with perfect capital market. Gleckmans equity is worth $100 million currently. The firms
Gleckman Inc. currently has no debt financing and exists in a world with perfect capital market. Gleckmans equity is worth $100 million currently. The firms current cost of equity capital is 10%. Gleckmans board is debating whether they should perform a leverage recapitalization by issuing $50mllion in debt and repurchasing equity with the new capital. They would face a debt cost of capital of 7%. What would be Gleckmans new equity cost of capital if they do perform the leverage recap? (assuming a perfect capital market)
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