Solved: What is firm cost of equity under mm extension, Finance Basics

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What is firm cost of equity under mm extension

Question:

Firm L has debt with a market value of $200,000 and a yield of 9%. The firm's equity has a market value of $300,000, its earnings are growing at a rate of 5%, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. Under the MM extension with growth, what is Firm L's cost of equity?

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Finance Basics: What is firm cost of equity under mm extension

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