Question: Question B (5 marks): ABC Inc. has a debt/equity ratio of 1.2. The firm has a cost of equity of 12% and a cost of

Question B (5 marks): ABC Inc. has a debt/equity ratio of

Question B (5 marks): ABC Inc. has a debt/equity ratio of 1.2. The firm has a cost of equity of 12% and a cost of debt of 8%. What will be the cost of equity if the target debt/equity ratio increases to 2.0 and the cost of debt does not change? Ignore taxes

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