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QUESTION 9 Company A is currently an all-equity firm with an expected return of 12.98%....

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Finance

QUESTION 9

Company A is currently an all-equity firm with an expected return of 12.98%. It is considering borrowing money to buy back some of its existing shares, thus increasing its leverage. Suppose the company borrows to the point that its debt-equity ratio is 1.25. With this amount of debt, the debt cost of capital is 9%. What will be the expected return of equity after this transaction?

NOTE: Submit your answers with 4 decimals after the dot. Do not include the "$" sign

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