Question: Question 1 - Expected equity return (20 points): Stern Tomorrow Co is financed entirely by equity that is priced to offer a 14% expected return

Question 1 - Expected equity return (20 points): Stern Tomorrow Co is financed entirely by equity that is priced to offer a 14% expected return on equity. If the company repurchases 40% of equity and substitutes an equal value of debt yielding 8%, what is the expected return on equity after refinancing? (Ignore taxes and cost of financial distress.)

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