Shawhan Supply plans to maintain its
optimal capital structure of 30% debt, 20% preferred stock, and 50%
common stock far into the future. The required return on each component
is: debt–10%; preferred stock–11%; and common stock–18%. Assuming a 40%
marginal tax rate, what after-tax rate of return must Shawhan Supply
earn on its investments if the value of the firm is to remain unchanged?
a.18.0%
b.13.0%
c.10.0%
d.14.2%
a.18.0%
b.13.0%
c.10.0%
d.14.2%
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