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If the risk-free rate is 40 and the market risk premium is

Morales Publishing's tax rate is 40%, its beta is 1.20, and it uses no debt. However, the CFO is considering moving to a capital structure with 30% debt and 70% equity. If the risk-free rate is 4.0% and the market risk premium is 6.0%, by how much is the firms cost of equity before and after capital structure change respectively?

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Finance Basics: If the risk-free rate is 40 and the market risk premium is

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