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Question(s) / Instruction(s):

2. Empress Corp. has no debt but can borrow at 8.2 percent. The firm's WACC is currently 11 percent, and the tax rate is 35 percent. A) EMPRESS‚ COST OF EQUITY IS _____ PERCENT B) IF THE FIRM CONVERTS TO 25 PERCENT DEBT, ITS COST OF EQUITY WILL BE _____PERCENT. C) IF THE FIRM CONVERTS TO 50 PERCENT DEBT, ITS COST OF EQUITY WILL BE _____ PERCENT. D) EMPRESS‚ WACC IN PARTS (B) AND (C) IS _____ PERCENT.

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