Question 10 (10 points) A firm with a return on common equity (ROCE) of 30% has financial leverage of 37.5% and a net after-tax borrowing cost of 5% on S240 million of net debt. What rate of return does this firm earn on its operations? The firm is considering repurchasing $150 million of its stock and financing the repurchase with further borrowing at a 5% after-tax borrowing cost. what effect will this transaction have on the firm's return on common equity if the same level of operating profitability is maintained? (a) (b)