Question: ABC Inc. has zero debt and its beta is 1.2. If the market risk premium (MRP) is 7% and the risk-free rate is 4%, then

ABC Inc. has zero debt and its beta is 1.2. If the market risk premium (MRP) is 7% and the risk-free rate is 4%, then its cost of equity will be _______ if it decides to move to a capital structure with 30% debt and 70% equity. Assume the firm has a tax rate of 40%.

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