The Border Crossing has no debt and a cost of capital of 11.2 percent.Assume the firm switches to a debt-to-equity ratio of .25 and issues bonds at par with a 6.3 percent coupon.What will be its cost of equity after the switch? Ignore taxes.
A) 11.71%
B) 12.33%
C) 11.54%
D) 9.98%
E) 12.43%
Correct Answer:
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