Question
Holland Auto Parts is considering a merger with Workman Car Parts. Workman's market determined beta is 0.9 and the firm currently is financed with 20%
Holland Auto Parts is considering a merger with Workman Car Parts. Workman's market determined beta is 0.9 and the firm currently is financed with 20% debt, at an interest rate of 8%, and its tax rate is 25%. If Holland acquires Workman, it will increase the debt to 60% at an interest rate of 9% and the tax rate will increase to 35%. The risk-free rate is 6% and the market risk premium is 4%. What will Workman's required rate of return on equity be after it is acquired? Please show each step. Having a problem with the simple multiplication and addition at the end. Please show all detail
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