Martinson Inc.is now financed 100% with equity.The cost of equity is 15%.Martinson is considering a proposal to borrow enough money at 7% to buy back half of its common stock.It would then be financed 50% with debt and 50% with equity.Assume that this does not affect the cost of equity.Martinson's tax rate is 40%.What is Martinson's cost of capital without and with the stock repurchase?
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