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Sheridan Chiropractic Clinic produces $200,000 of cash flow each year. The firm has no debt outstanding,...

Sheridan Chiropractic Clinic produces $200,000 of cash flow each year. The firm has no debt outstanding, and its cost of equity capital is 20 percent. The firm’s management would like to repurchase $680,000 of its equity by borrowing $680,000 at a rate of 10 percent per year. If we assume that the debt will be perpetual, find the cost of equity capital for Sheridan after it changes its capital structure. Assume that Modigliani and Miller Proposition 1 assumptions hold. (Round answer to 2 decimal places, e.g. 17.54%.) Cost of equity capital enter the cost of equity capital in percentages rounded to 2 decimal places %

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ONE MORE WAY, WE CAN CALCULATE COST OF EQUITY

jeff jeffy answered 3 hours ago
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