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Supppose the debt ratio is 50%, the interest rate on a new debt is 8%, the current cost of equity is16%,and the tax is 40%.

Supppose the debt ratio is 50%, the interest rate on a new debt is 8%, the current cost of equity is16%,and the tax is 40%. An increase in the debt ratio to 60% would have to decrease the weighted averasge cost of apital

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