The firm you currently runis currently80.0% in equity and20.0% in debt. Its current WACC is12.0%, marginal corporate
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The firm you currently runis currently80.0% in equity and20.0% in debt. Its current WACC is12.0%, marginal corporate tax rate is26.0%, the yield to maturity on its outstanding bonds 8.2% and is expected to remain constant, the risk-free rate is 3.0%, and the expected return on the market portfolio is9.5%.You arethinking of strategically positioning itself for an acquisition and has the capacity to increase its level of debt to equity ratio to50% equity and 50% debt if needed.
If the firm changed its capital structure as proposed, what would be the new equity cost of capital?
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