What is company a return on levered equity

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Company A has an expected net income of 4 million Euros at the end of the year. The company is currently all equity financed but it is planning to undertake some debt so that the debt-to-equity ratio is now 0.5 and the ratio will be kept constant by the company. The assets will be fully depreciated in the next three years, with annual depreciation installments of 1,000,000 Euro each. The company does not plan to acquire any asset. The expected return on unlevered equity for Company A is 9.25% and the cost of debt is 5.25%. The tax rate on corporate earnings is 32%. What is Company A's return on levered equity?

Reference no: EM133073437

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