Firm A and Firm B plan to raise $1 million to finance identical projects. Firm A finances
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Firm A finances the project with 100% equity, whereas firm B uses a 50-50 mix of debt and equity.
The interest rate on the debt equals 7%.
At what rate of return on the investment (i.e., assets) will the rate of return on equity be the same for Firms A and B?
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