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Assume that capital markets are perfect. A firm finances its operations via $60 million in stock with a required return of 15% and $40 million in bonds at 8%. Assume the company can use the proceeds to retire $10 million worth of equity, (a) what would happen to the firm’s WACC? (b) What would happen to the required return on the company’s stock?

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Financial Management, Finance

Category:- Financial Management
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