Optimal capital structure Hawaiian Macadamia Nut Company competes in an industry where the required return on assets r_A, is 10%. Under M&M Proposition Two, what is the firm’s cost of equity, r_l, and weighted average cost of capital under each capital structure below?

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D/E ratio 0% 10 20 30 40 50 Cost of Debt, ra 3.0% 3.0 3.0 3.5 3.8 4.0