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OPS: the course im studying is finance and investment, please do not use handwriting or...

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Finance

OPS: the course im studying is finance and investment, please do not use handwriting or exel to answer.

The debt ratio in a company changes from 1 to 2. a) Show through a calculation what happens to the required return on equity after the change if we ignore tax. The required return on equity is before the change is 8% and the average debt interest rate is 4%. b) Would the WACC have fallen or risen in the presence of tax if the above change had taken place? EXPLAIN

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