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What is the new required cost of equity

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Question - Modigliani and Miller's world of no taxes - Air Seattle is looking to change its capital structure from an all-equity firm to a levered firm with 50% debt and 50% equity. Air Seattle is a not-for-profit company and therefore pays no taxes. If the required rate on the assets (Ra) of Air Seattle is 20%, what is the current required cost of equity (when Air Seattle is an all-equity firm)? What is the new required cost of equity if the cost of debt is 10%? What is the current required cost of equity of Air Seattle if it is an all-equity firm?

Reference no: EM133172136

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