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Consider a world with no taxes and perfect capital markets. The WW Corporation is currently all equity financed. Its earnings are $10M per year and

Consider a world with no taxes and perfect capital markets. The WW Corporation is currently all equity financed. Its earnings are $10M per year and will stay that way in perpetuity. The value of the firm is $120M. The firm is considering issuing risk-free debt worth $50M and maturing in 10 years at an interest rate of 6% and using it to repurchase $50M of equity.What would the return on equity be after the refinancing

a. 9.3% b. 8.33% c. 6% d. 10%

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