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What is lics current cost of equity

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Problem - Lighter Industrial Corporation (LIC) is considering a large-scale recapitalization. Currently, LIC is financed with 25% debt and 75% equity. LIC is considering increasing its level of debt until it is financed with 60% debt and 40% equity. The beta on its common stock at the current level of debt is 1.5, the risk-free rate is 6%, the market risk premium is 4%, and LIC faces a 25% federal-plus-state tax rate.

Required -

a. What is LIC's current cost of equity?

b. What is LIC's unlevered beta?

c. What will be the new beta and new cost of equity if LIC recapitalizes?

Reference no: EM132733232

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