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Question 13 1 pt: (Use the following information for the next three questions). Consider a world with taxes but no other market imperfections. BLT machinery
Question 13 1 pt: (Use the following information for the next three questions). Consider a world with taxes but no other market imperfections. BLT machinery has a debt to equity ratio of 2/3. Its cost of equity is 20%, cost of debt is 4%, and tax rate is 35%. Assume that the risk-free rate is 4%, and market risk premium is 8%. Suppose the firm repurchases stock and finances the repurchase with debt, causing its debt to equity ratio to change to 3/2. What is the firm's new cost of equity? None of the choices New cost of equity is 26.05% New cost of equity is 23.59% New cost of equity is 16.32% New cost of equity is 28.00%
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