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You are given the following data for a company: Cost of debt = 8%, cost of retained earnings = 12%, cost of new common equity
You are given the following data for a company: Cost of debt = 8%, cost of retained earnings = 12%, cost of new common equity = 14%, tax rate = 35% and retained earnings = $1000. The firms target capital structure is 40% debt and 60% common equity. Compute the following:
A. Retained earnings break point
B. WACC below the RE break point
C. WACC above the RE break point:
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