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Robins Doughnuts Limited currently has no debt. If they choose to borrow, they can do so at a rate of 6.4%. The firm's WACC is currently 9.5% and the tax rate is 35%. There are no costs of financial distress. a) What is the company's cost of equity? b) If the firm converts to 45% debt, what will its' cost of equity be? c) If the firm converts to 60% debt, what will its' cost of equity be? d) What is the company's WACC in part (c)?
Sagot :
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