Question: Please show all calculations. If using Excel, please show formulas and data. Practice 1. A firm has zero debt and an overall cost of capital

Please show all calculations. If using Excel, please show formulas and data.

Practice 1.

A firm has zero debt and an overall cost of capital of 12.5 percent. The firm is considering a new capital structure with 55 percent debt at an interest rate of 6.5 percent. Assume there are no taxes or other imperfections. What will be the cost of equity capital of the levered firm?

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