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Molly GmbH has no debt but can borrow at 9 percent. The firm's WACC is currently 15 percent, and the tax rate is 35 percent.
a. What is Molly's cost of equity?
b. If the firm converts to 25 percent debt, what will its cost of equity be?
c. If the firm converts to 50 percent debt, what will its cost of equity be?
d. What is Molly's WACC in part (b)? In part (c)?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M939061

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