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Cost of equity

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B2. (Cost of equity) The cost of capital is 15%, the before-tax cost of debt is 9%, and the marginal
income tax rate is 40%. The market value of debt is $50 million and the market value
of equity is $50 million. What is the cost of equity?

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Solution Summary

The response provides steps to compute cost of equity capital.

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B2. (Cost of equity) The cost of capital is 15%, the before-tax cost of debt is 9%, and the marginal
income tax rate is ...

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