Modigliani Co. has firm assets that are considered twice as risky as the overall market. The firm's
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Question:
Modigliani Co. has firm assets that are considered twice as risky as the overall market. The firm's target capital structure is 40% equity and 60% debt. If the expected market risk premium is 8% and the risk free rate is 4%, what is the expected return on Modigliani's equity? (Assume that the tax rate is 0%).
A. 20%
B. 24%
C. 44%
D. 28%
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-1259024962
6th Canadian edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim
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