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Two firms X and Y are in the same line of business and have nearly identical business risk. Firm X is all Equity Financed and

Two firms X and Y are in the same line of business and have nearly identical business risk. Firm X is all Equity Financed and Firm Y is financed 2/3 Equity, 1/3 Debt. Which firm should have a higher Equity Beta?

Firm X

Firm Y

Cannot be determined Firm X Firm Y

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