Question

re = + (ro – ra) D E r = 0.13 + ((0.13-0.09) (0.5)] = 0.15. or 15%

this is mm proportion 2 please explain how this formula is derived please help me understand
thanks in advance

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Following is the explanation of the derivation of the MM Proposition II formula:-

The cost of capital is given by the formula of weighted Average cost of capital (Wace) WAC = TE D D+ E x rot E D+ E WACL a co

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