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One of your new employees notes that your debt has a lower cost of capital ​(5​%)...

One of your new employees notes that your debt has a lower cost of capital ​(5​%) than your equity (15​%). ​So, he suggests that the firm swap its capital structure from 26​% debt and 74​% equity to 74​% debt and 26​% equity instead. He estimates that after the​ swap, your cost of equity would be 21​%.  

a. What would be your new cost of​ debt? Make your calculations based on your​ firm's pre-tax WACC.

b. Have you lowered your overall cost of​ capital?

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