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A Firm Has Zero Debt and an Overall Cost of Capital

Question 65

Multiple Choice

A firm has zero debt and an overall cost of capital of 11.7 percent.The firm is considering a new capital structure with 45 percent debt at an interest rate of 6.8 percent.Assume there are no taxes or other imperfections.What will be the levered cost of equity?


A) 16.47%
B) 14.67%
C) 15.80%
D) 15.71%
E) 16.16%

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