An all-equity firm with a cost of capital of 10% is considering adding $2 million in debt at a cost of 5% to its capital structure. The firm has 75,000 shares outstanding at a price of $50 per share. The firm's tax rate is 40%. Assuming the firm does the change to its capital structure, the firm's new cost of equity will be?

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To determine the firms new cost of equity after adding debt to its capital struc... View the full answer