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Author Question: Vafeas Inc.s capital structure consists of 75% debt and 25% common equity, it has a beta of 1.5, and ... (Read 150 times)

903f23fj0

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on: Aug 7, 2023
Vafeas Inc.’s capital structure consists of 75% debt and 25% common equity, it has a beta of 1.5, and its tax rate is 40%. However, the CFO thinks the company has too much debt, and he is considering moving to a capital structure with 45% debt and 55% equity. The risk-free rate is 6% and the market risk premium is 7%. By how much would the firm’s cost of equity change as a result of altering its capital structure?

◦

–3.20%


◦

–3.78%


◦

–4.36%


◦

4.91%

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by 903f23fj0 on Aug 7, 2023

spicyzack

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Reply #1 on: Aug 7, 2023
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903f23fj0

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Reply 2 on: Aug 7, 2023
Excellent

bigsis44

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Reply 3 on: Yesterday
:D TYSM

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