Multiple Choice
Health and Wealth Company is financed entirely by common stock that is priced to offer a
15% expected return. If the company repurchases 25% of the common stock and substitutes an equal value of debt yielding 6%, what is the expected return on the common stock after refinancing? (Ignore taxes.)
A) 18%
B) 21%
C) 15%
D) None of the above
Correct Answer:
Verified
Correct Answer:
Verified
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