Problemdouglass amp frank has a debt-equity ratio of 20 the, Ask an Expert

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Problem:

Douglass & Frank has a debt-equity ratio of 2.0. The pre-tax cost of debt is 3 percent while the unlevered cost of capital is 26 percent.

Required:

Question: What is the cost of equity if the tax rate is 39 percent?

Note: Please provide reasons to support your answer.

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