Multiple Choice
Learn and Earn Company is financed entirely by common stock that is priced to offer a 20 percent expected return. If the company repurchases 50 percent of the stock and substitutes an equal value of debt yielding 8 percent, what is the expected return on its common stock after refinancing?
A) 32 percent
B) 28 percent
C) 20 percent
D) 14 percent
Correct Answer:
Verified
Correct Answer:
Verified
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