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Suppose that Rearden Metal currently has no debt and has an equity cost of capital of 12%. Rearden ...

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Suppose that Rearden Metal currently has no debt and has an equity cost of capital of 12%. Rearden ...

Suppose that Rearden Metal currently has no debt and has an equity cost of capital of 12%. Rearden is considering borrowing funds at a cost of 6% and using these funds to repurchase existing shares of stock. Assume perfect capital markets. If Rearden borrows until they achieved a debt-to-equity ratio of 50%, then Rearden's levered cost of equity would be closest to:
A) 10.0%
B) 12.0%
C) 15.0%
D) 16.0%

Textbook

Corporate Finance: The Core

Edition: 4^th

Authors: Berk, DeMarzo

Read 270 times

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