What would be downes levered cost of equity

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Q. Downes International presently has no debt and has an equity cost of capital of 10%. The industry is considering borrowing funds at a cost of 6% and using these funds to repurchase existing shares of stock. Assume perfect capital markets. If Downes borrows until they achieve a debt-to-equity ratio of 20%, then Downes' levered cost of equity would be?

Reference no: EM1399182

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