What will Duck Brewery required rate of return

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Question - The Duck Brewery currently has an all-equity capital structure but is concerned that this is not optimal, and is considering borrowing to repurchase 40% of its issued shares. Given the following:

Expected market return = 15% p.a. (inclusive of imputation credits) Beta =0.6

Corporate tax rate = 30%

The proportion of tax paid claimed by shareholders = 0.6

What will Duck Brewery's required rate of return on its normal operations be after the share buy-back assuming it can borrow (risk free) at 8% p.a.?

Reference no: EM133072757

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