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Estimate of the return on equity in the firm

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Rio Sinto has a book value of equity of 1800 and a book value of debt of 1000. It holds excessive cash on its balance sheet of 600. Its net operating income is 250. The interest rate on its debt is 9% and the corporate tax rate is 35%. Accounts receivable are estimated to be 10% of revenues. What is your estimate of the return on equity in the firm (correcting for excessive cash)? Choose the closest number unless you think it cannot be determined.

Reference no: EM132481304

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