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Axon Industries needs to raise $4000000 USDs for a new investment project. If the firm issues 1-year debt, it may have to pay an interest rate of 10%, although Axon's managers believe that 7% would be a fair rate given the level of risk. If the firm issues equity, they believe the equity may be underpriced by 7.5%. What is the cost (in USDs) to current shareholders of financing the project out of equity?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92840335

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