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Spectronix Inc

question 54

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Spectronix Inc.operates in a world of perfect capital markets,has no debt,and has a required rate of return on equity of 10%.An executive manager has suggested that borrowing money to buy back outstanding stock is a good idea because it would replace equity financing with less expensive debt financing,thus increasing the value of the firm.Assume the firm issues new debt with a required return of of 5% to repurchase 30% of the outstanding stock.What is the cost of equity at the conclusion of this transaction?


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WAIS

The Wechsler Adult Intelligence Scale, an IQ test designed to measure intelligence and cognitive ability in adults and older adolescents.

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The extent to which a score or measurement can accurately predict future performance or behaviors.

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