Determine the shareholders expected return on equity

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Reference no: EM131563444

A firm has a WACC of 12%, $500,000 in 9% debt, and $800,000 in equity. Both debt and equity are shown at market values, the firm pays no taxes, and the firm is in no danger of dealing with financial distress.

Determine the shareholders’ expected return on equity.

How can the expected return on equity be reduced?

How does your answer to part of change if the firm pays a 40% corporate tax rate?

Reference no: EM131563444

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