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What would be cost of equity with the new capital structure

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Reference no: EM132770320

Problem 1: A firm has zero debt in its capital structure and has an overall cost of capital of 10 percent. The firm is considering a new capital structure with 60 percent debt at an interest rate of 8 percent. Assuming there are no taxes or other imperfections, what would be the cost of equity with the new capital structure?

Option 1: 9%
Option 2: 14%
Option 3: 10%
Option 4: 13%

Reference no: EM132770320

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