Question
Given the following information: The rate of return on assets (R a ) .20 The cost of debt (i) .07 The standard Deviation of R
Given the following information:
| The rate of return on assets (Ra) | .20 |
| The cost of debt (i) | .07 |
| The standard Deviation of Ra () | .11 |
| The Tax Rate (t) | .35 |
Calculate the difference between the expected rate of return to equity if leverage increased from 1 to 2.5.
| .12675 | ||
| .2145 | ||
| .34124 | ||
| None of the answers are correct |
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Basic Finance An Introduction To Financial Institutions Investments And Management
Authors: Herbert B. Mayo, Michael J Lavelle
13th Edition
0357714741, 978-0357714744
