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A firm valued at 14,00,00,000 has a debt equity ratio of 1 . The corporate tax rate is 12% and the interest rate on debt
A firm valued at 14,00,00,000 has a debt equity ratio of 1 . The corporate tax rate is 12% and the interest rate on debt is 8%. The amount of debt is refinanced once every year to keep the debt equity ratio constant. If the Weighted average cost of capital is 12%, what is the rate of return on equity? [10pts.]
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