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You are given the following information for XYZ Corp. Long-term debt outstanding: EUR 300,000 Current yield to maturity (R d ) 8% Number of shares

You are given the following information for XYZ Corp.

Long-term debt outstanding: EUR 300,000

Current yield to maturity (R_d) 8%

Number of shares of common stock 10,000

Price per share EUR 50

Book Value per share EUR 25

Expected rate of return on stock (R_e) 15%

Calculate XYZs company cost of capital (R_a). Assume no taxes. (20 points)

How would R_e and the cost of capital change if XYZ's stock price rises to EUR 75 due to surge in profits? Business risk is unchanged. (10 points)

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