What is the expected rate of return to equity holders if the firm has a tax rate of 35%,the interest rate on debt is 10%,WACC is 15%,and the debt-asset ratio is 60%?
A) 12.50%
B) 21.25%
C) 22.50%
D) 27.75%

Name: What is the expected rate of return to equity holders if the firm has a tax rate of 35%,the interest rate on debt is 10%,WACC is 15%,and the debt-asset ratio is 60%? A) 12.50% B) 21.25% C) 22.50% D) 27.75%
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Quizplus · Accepted Answer

0.15 = (1 − 0.60)R_e + 0.60(0.10)(1 − 0.35); R_e = 0.2775, or 27.75%

What Is the Expected Rate of Return to Equity Holders