Changes to debt to equity ratio

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Stock Co. is currently all-equity financed, with a cost of equity of 8.00%. Using Model 1, find what Stock Co.’s cost of equity will be if it changes to a debt to equity ratio of 2/5, given a YTM on its debt of 5.25%. Give the answer in percent to two decimal places, but do not include a percentage sign (e.g., if you compute the answer to be 1.234%, write in 1.23).

Reference no: EM131825191

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