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XYZ is a levered firm with debt-to-equity ratio = 0.4 , and return on asset= 11% . Its debt is risk-free. Suppose the risk-free rate

XYZ is a levered firm with debt-to-equity ratio = 0.4 , and return on asset= 11% . Its debt is risk-free. Suppose the risk-free rate is 2.5%.

(a) What is its return on equity ?

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