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Morales Publishing's tax rate is 40%, its beta is 0.8, and it uses no debt....

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Accounting

Morales Publishing's tax rate is 40%, its beta is 0.8, and it uses no debt. However, the CFO is considering moving to a capital structure funded by debt, which produces a beta of 1.9. If the risk-free rate is 3% and the market risk premium is 6%, by how much would the capital structure shift change the firm's cost of equity (in percent)?

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