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Your all-equity firm will have $155,000 in free cash flow to shareholders next year. The cost of equity is 13% and cost of debt
Your all-equity firm will have $155,000 in free cash flow to shareholders next year. The cost of equity is 13% and cost of debt is 6%. The long-term growth in FCF is 2%/year, forever. Assume no taxes. If your firm decides to convert to a 0.65 debt-to-equity ratio, what is the new cost of equity?
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