What Is the Expected Return on Equity for a Tax-Free

question 62

Multiple Choice

What is the expected return on equity for a tax-free firm with a 15 percent expected return on assets that pays 12 percent on its debt,which totals 25 percent of assets?

• A)24 percent
• B)15.60 percent
• C)16 percent
• D)20 percent

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Definitions:

Minerals

Inorganic substances required by the body in small amounts for a variety of functions, including bone formation and enzyme activity.

Nutritional Substances

Elements found in food that are essential for the growth, development, and maintenance of the body; includes vitamins, minerals, proteins, fats, and carbohydrates.

Elements

The basic substances that constitute all matter, each with its own distinct properties, which cannot be broken down into simpler substances by chemical means.

Sodium

A chemical element (Na) that is essential for the body in small amounts but can lead to high blood pressure and other health issues when consumed in excess.