Dyson Inc. currently finances with 20.0%, but its new CFO is considering changing the capital structure to 60.0% debt by issuing additional bonds and using the proceeds to repurchase and retire some common stock at book value. Given the data shown below, by how much would this recapitalization change the firm’s cost of equity? Risk-Free Rate – 5%, Market risk premium – 6%, Current beta .15, Tax rate-40%, Current debt ratio-20%, Target debt ratio 60%
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