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**could you please help me understand how to solve this question. Thanks** A firm with a 50 percent debt ratio faces a 40 percent tax

**could you please help me understand how to solve this question. Thanks**

A firm with a 50 percent debt ratio faces a 40 percent tax rate and pays a 10 percent interest rate on its debt. If the return on assets is 20 percent the return on equity will be

Answer is 18 percent. .

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