A firm currently has a debt-to-equity ratio of 1/2. Almost risk-free debt pays 6.9% interest rate. The
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A firm currently has a debt-to-equity ratio of 1/2. Almost risk-free debt pays 6.9% interest rate. The expected return on equity is 11%. What happens to the expected rate of return on equity if the firm reduces the debt-to-equity ratio to 1/3? Suppose the firm does not pay taxes. (Do not round up intermediate calculations. Enter your answer as a percentage, rounded to 2 decimal places.)
Related Book For
Financial Management Theory and Practice
ISBN: 978-1305632295
15th edition
Authors: Eugene F. Brigham, Michael C. Ehrhardt
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