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Suppose that Continental Tech. currently has no debt and has an equity cost of capital of 1 2 % . The company is considering borrowing

Suppose that Continental Tech. currently has no debt and has an equity cost of capital of

12 % .

The company is considering borrowing money at a cost of

4 %

to repurchase existing shares of stock. Assume the target debt

-

-

asset ratio is

20 % .

In a perfect capital market, the firm's levered cost of equity is

__% .

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