Equal amounts of debt and equity financing

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Reference no: EM131499725

What is the return on equity for a firm with equal amounts of debt and equity financing, a 6% weighted average cost of capital, a 35% tax rate, and a 3% coupon rate on its debt that is selling at par value?

( Please show calculation an intuition so I can understand how the answer is achieved and also so I can do other similar questions, thanks in advance)

a) 0.98%

b) 5.03%

c) 10.05%

d) 12.75%

e) cannot be determined

Reference no: EM131499725

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