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London Drug's cost of debt is 6%. The risk-free rate of interest is 2.5%. The expected return on the market portfolio is 7%. After effective
London Drug's cost of debt is 6%. The risk-free rate of interest is 2.5%. The expected return on the market portfolio is 7%. After effective taxes, London Drugs's effective tax rate is 30%. Its optimal capital structure is 40% debt and 60% equity. If London Drug's beta is estimated at 0.8, What is London Drug's after tax cost of equity? (PLEASE Answer in decimal format(e.g., 0.0500 with 4 decimal places instead of 5%). DO NOT use % as Moodle doesnot recognize %.)
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