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Phillips Incorporated is currently 100% equity finance. Its current beta coefficient is 1.20. The expected market rate of return is 8% and the risk free
Phillips Incorporated is currently 100% equity finance. Its current beta coefficient is 1.20. The expected market rate of return is 8% and the risk free rate is 3%. If Phillips Inc.'s before tax cost of debt is 5%, should it change its capital structure of 40% debt and 60% equity? Assume an average corporate tax rate of 30%.
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