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A firm currently has a debt - equity ratio of 1 / 2 . The debt, which is virtually riskless, pays an interest rate of
A firm currently has a debtequity ratio of The debt, which is virtually riskless, pays an interest rate of The expected rate of return on the equity is What would be the expected rate of return on equity if the firm reduced its debtequity ratio to Assume the firm pays no taxes.
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