What is the premium added to the unlevered cost of equity

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Reference no: EM13334866

Assume the WACC for a firm if it was unlevered is 8%, beta unlevered is 1.0, the market return is 8%, and the risk free rate is 2%. Also assume that the firm has $100 in debt and $100 in equity and that its tax rate is 40%. Based on this information and using Hamada's formula, what is the premium added to the unlevered cost of equity due to financial leverage/risk?

Reference no: EM13334866

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