The firms cost of equity before and after capital structure

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Reference no: EM132058750

Morales Publishing's tax rate is 40%, its beta is 1.20, and it uses no debt. However, the CFO is considering moving to a capital structure with 30% debt and 70% equity. If the risk-free rate is 4.0% and the market risk premium is 6.0%, by how much is the firms cost of equity before and after capital structure change respectively?

Reference no: EM132058750

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