Question: Firm U has no debt, its shareholders require a return of 15%, and EBIT of $15,000 which is paid annually in perpetuity starting in one

Firm U has no debt, its shareholders require a return of 15%, and EBIT of $15,000 which is paid annually in perpetuity starting in one year. Firm L is identical except it is partially financed by $20,000 of perpetual bonds with an annual coupon of 10%. The tax rate is zero. What is the cost of equity for Firm L?

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