Question 3 The structure of BigCo is such that the company has R75 million of...
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Question 3 The structure of BigCo is such that the company has R75 million of shareholders' capital and reserve, R25 million market value of outstanding debt, and these funds are invested in a diversified portfolio of assets, which are expected to earn a return equal to the market return. The risk-free rate of return in the market is 6%, the company's debt is yielding 8% and investors expect the market to give a return of 12%. What is the return expected from the equity shares in BigCo? (ignore tax) A 12% B 13% 13.33% 13.5% D 1
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