For a levered firm where bA = beta of assets and bD = beta of debt, the return on equity (rE) is equal to
A) rE = rA.
B) rE = rA + (D/E) × [rA - rD].
C) rE = rA + (D/(D + E) ) × [rA - rD].
D) None of the options are correct.
Correct Answer:
Verified
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