Lighter Industrial Corporation (LIC) is considering a large-scale recapitaliza tion. Currently, LIC is financed with 25%

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answerhappygod
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Lighter Industrial Corporation (LIC) is considering a large-scale recapitaliza tion. Currently, LIC is financed with 25%

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Lighter Industrial Corporation (LIC) is considering a
large-scale recapitaliza tion. Currently, LIC is financed with 25%
debt and 75% equity. LIC is con sidering increasing its level of
debt until it is financed with 60% debt and 40% equity. The beta on
its common stock at the current level of debt is 1.5, the risk-free
rate is 6%, the market risk premium is 4%, and LIC faces a 40%
federal plus-state tax rate.
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