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Company A is considering a change in the capital structure that will increase gearing to 30:70 (Debt:Equity).
The risk -free rate is 3% and the return on the market portfolio is expected to be 10%.
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Using the Capital Asset Pricing Model, calculate the cost of equity resulting from the proposed change to the capital structure.
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C. 9.3%
D. 12.3%
Answer: D

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B. 1
C. 2
D. 3
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