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Suppose the Debt Ratio (D/TA)is 50%,the Interest Rate on New

Question 36

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Suppose the debt ratio (D/TA)is 50%,the interest rate on new debt is 8%,the current cost of equity is 16%,and the tax rate is 40%.An increase in the debt ratio to 60% would decrease the weighted average cost of capital (WACC).

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