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You are the CEO of an unlevered company. Your cash flow at the end of this year will be either 140, 100 or 60 with

You are the CEO of an unlevered company. Your cash flow at the end of this year will be either 140, 100 or 60 with equal probability. It will then be the same value every year forever. The companys cost of equity is 10%. The risk-free rate is 8%. The MM assumptions hold

Q: What is the maximum amount of risk-free debt that you can issue?

Suppose you issue the maximum amount of risk-free debt possible.

Q: What is the company's cost of equity now?

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