A firm currently has a debt-equity ratio of 1/2. The debt, which is virtually riskless, pays...

A firm currently has a debt-equity ratio of 1/2. The debt, which is virtually riskless, pays an interest rate of 8.1%. The expected rate of return on the equity is 12%. What would happen to the expected rate of return on equity if the firm reduced its debt-equity ratio to 1/3? Assume the firm pays no taxes. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Expected rate of return on equity

%

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jeff jeffy answered 8 months ago

A firm is considering a project that is virtually risk-free. The company has a beta of 1.3 and a debt-equity ratio of.4

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