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    CAPM to calculate the cost of equity capital

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    Wyden Brothers uses the CAPM to calculate the cost of equity capital. The company's capital structure consists of common stock, preferred stock, and debt. Which of the following events will reduce the company's WACC?

    a) A reduction in the market risk premium.

    b) An increase in the risk-free rate.

    c) An increase in the company s beta.

    d) An increase in expected inflation.

    e) An increase in the flotation costs associated with issuing preferred stock.

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