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Calculate the return required by shareholders

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Reference no: EM133111766

CMR has no debt. The stock's beta is 1.5 and its expected profitability, RE, is 15%. The company decides to go into debt at the risk-free rate, Rf, of 5% to buy back 50% of its shares. Capital markets are supposed to be perfect.

Calculate the return required by shareholders as a result of this redemption.

Reference no: EM133111766

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