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Assume that capital markets are perfect. A firm finances its operations with $50 million in stock, with a required return of 15 percent, and $40 million in bonds, with a required return of 9 percent.

Assume that the firm could issue $10 million in additional bonds, at 9 percent. Using the proceeds to retire $10 million worth of equity, what would happen to the firm's WACC? What would happen to the required return on the company's stock?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92082873

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