A company without debt has a WACC of 8%. The firm decides to go into debt at a rate of 5% to the tune of 33.3% (one third) of its value in order to finance a capital reduction of a similar amount. What is the cost of equity now? If the market risk premium is 4% and the β of the shares was 1.2, what is the new β of the shares after capital reduction?
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A company without debt has a WACC of 8%. The firm decides to go into debt at a rate of 5% to the tun...
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