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Nova Sun Ltd. is a levered firm with a weighted average cost of capital of 9%. Currently it has a debt to equity ratio of
Nova Sun Ltd. is a levered firm with a weighted average cost of capital of 9%.
Currently it has a debt to equity ratio of 1.5, a before-tax cost of debt of 5.5% and a corporate tax rate of 35%.
Assume there are no bankruptcy costs.
a) What is the firms cost of equity?
b) What is Nova Suns unlevered cost of equity?
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