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The risk-free rate is 2% and the market risk premium is 5%. NULU Corporation used to operate its business in unlevered form and had an
The risk-free rate is 2% and the market risk premium is 5%. NULU Corporation used to operate its business in unlevered form and had an equity Beta estimated at 1. The firm will move to a new capital structure featuring a debt-to-assets ratio of 20%, with a debt beta of zero and cost of debt capital of 2%. Assuming the tax rate is zero estimate: the old cost of equity capital, old WACC, new cost of equity capital, and the new WACC.
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