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Finding out the cost of equity


Problem: A Corp. has no debt but can borrow at 8 %. The firm's WACC is currently 12% and has tax rate of 35%.

Q1. What is the cost of equity?

Q2. If the Corp. converts to 25 % debt,what will cost of equity be? 50 %?

Q3. What is shadow's WACC for part b: 25 % and 50 %.

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Finance Basics: Finding out the cost of equity
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