Hick’s Realty has zero debt and an overall cost of capital of 12.75 percent ( required return on assists as a firm
is debt-free). The firm is considering a new capital structure with 25 percent debt. The interest rate on the debt would be 7.3 percent and the corporate tax rate is 24 percent. What would be the cost of equity with the new capital structure if you include taxes?
a. 14.14 percent
c. 15.37 percent
d. 15.89 percent
e. 16.12 percent
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