Question: Q10 (Lecture note chapter 17 MM proposition II pages 20-27) A firm is unlevered and has a cost of equity capital of 9%. What is

Q10

(Lecture note chapter 17 MM proposition II pages 20-27) A firm is unlevered and has a cost of equity capital of 9%. What is the cost of equity if the firm becomes levered at a debt-equity ratio of 2? The expected cost of debt is 7%. (Assume no taxes.) (1)

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