The market value of firm ls debt is 200000 and its yield is


The market value of Firm L's debt is $200,000 and its yield is 9%. The firm's equity has a market value of $300,000, its earnings are growing at a rate of 5%, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%. Under the MM extension with growth, what is Firm L's cost of equity?

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Financial Management: The market value of firm ls debt is 200000 and its yield is
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