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Explain mm proposition 2

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Sunlight Batteries has a 40% debt. Its required return on assets (WACC) is 12% and cost of debt is 8%. What is the company's cost of equity capital? If we increase debt to 55% what will be the new cost of equity. What will be weight of equity in sunlight if cost of equity is 20%. Assume we live in a world, where there's no tax.

Explain MM proposition 2 (no tax; case 1).

Reference no: EM132653051

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