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Saxx plc is a company financed by both equity and debt. Its debt-to-equity ratio is 0.6, its WACC is 9.9% and its cost of debt
Saxx plc is a company financed by both equity and debt. Its debt-to-equity ratio is 0.6, its WACC is 9.9% and its cost of debt is 8%. The corporate tax rate is 20%. a. What is the firms cost of equity capital? b. What is the firms unlevered cost of equity capital?
c. What would the cost of equity be if the debtequity ratio were 2? What if it were zero? Explain your answers.
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