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Rafis Hot Dogs Corporation has debt with both a face and a market value of $35,000. This debt has a coupon rate of 6.6 percent
Rafis Hot Dogs Corporation
has debt with both a face and a market value of $35,000. This debt
has a coupon rate of 6.6 percent and pays interest annually. The expected
earnings before interest
and taxes are $8,300, the tax rate is 21 percent, and the unlevered cost of capital is 10.9 percent.
What is the cost of equity (assuming M&M Case II holds)?
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