What is the expected rate of return to equityholders if the firm has a 35% tax rate, a 10% rate of interest paid on debt, a 15% WACC and a 60% debt-asset ratio?

Name: What is the expected rate of return to equityholders if the firm has a 35% tax rate, a 10% rate of interest paid on debt, a 15% WACC and a 60% debt-asset ratio?
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Question

Quizplus · Accepted Answer

WACC =
.15 = .65(.10)(.60) + rS1U1B1equityS1U1B0(.40)
.111 = .4 rS1U1B1eS1U1B0S1U1B1quityS1U1B0S1U1B1
27.75%=rS1U1B1eS1U1B0S1U1B1quityS1U1B0S1U1B1

What Is the Expected Rate of Return to Equityholders If