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Stock market analysts report that: (a) the common stock of Quaker Electronics Company has a beta of 1.22; (b) the company's debt-to-equity ratio is about
Stock market analysts report that: (a) the common stock of Quaker Electronics Company has a beta of 1.22; (b) the company's debt-to-equity ratio is about 0.20; (c) the company's cost of debt is about 9% p.a.; and (d) that the company's effective corporate income tax rate is about 35%. Meanwhile, U.S. government Treasury Bills are currently bearing interest rates of about 5% p.a. and the market risk premium for a diversified portfolio of common stocks appears to be about 8% relative to the T-Bill rate. If Quaker increases its debt-to-equity ratio to 0.30, what will be its weighted average after-tax cost of capital
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