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Suppose, you are evaluating a firm s capital structure policy. The firm has a zero debt policy currently. Running the CAPM model yielded a return

Suppose, you are evaluating a firms capital structure policy. The firm has a zero debt policy currently. Running the CAPM model yielded a return of 15%. This firm has decided to borrow so that the debt-to-equity ratio is 1:2.5. Cost of debt is 10%. Tax rate is 25%. Estimate the firms weighted average cost of capital after the restructure.

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