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Jasmine Corp has a levered beta of 1.09. The firm has a debt to total capital ratio of 80%. If the firm decides to decrease

Jasmine Corp has a levered beta of 1.09. The firm has a debt to total capital ratio of 80%. If the firm decides to decrease their debt % in the firm by paying off some of their outstanding debt, what will most likely happen to their levered beta and therefore overall cost of equity?

  • Beta would likely decrease and Cost of Equity will likely be unaffected

  • Beta and Cost of Equity will likely decrease

  • Beta would likely increase, but Cost of Equity will decrease

  • Beta and Cost of Equity will likely decrease

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