GTC Inc. currently has 40% debt and 60% equity and its levered beta is 2.8. However, the
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GTC Inc. currently has 40% debt and 60% equity and its levered beta is 2.8. However, the company's CEO believes that the company should use more debt. If the company increases its debt to 50%, what is the new levered beta for the company? If the risk-free rate is 4% and the market risk premium is 8%, what is the new cost of equity? The tax rate is 40%.
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