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An all equity firm has a return on assets of 13. The firm is considering converting to a debt- equity ratio of 48%. The pretax cost of debt is 8.

An all equity firm has a return on assets of 13.3%. The firm is considering converting to a debt- equity ratio of 48%. The pretax cost of debt is 8.6%. Ignoring taxes, what will the cost of equity be if the firm switches to the levered capital structure?

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