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A firm finances a $40 million project by borrowing $20 million to be repaid over the life of the project and by issuing common stocks worth of $20 million. Determine the required rate of return, both before- and after-tax. Borrowed funds cost 10%, equity costs 20%, and the tax rate is 40%. Revenue (R) will be independent of the financing method.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92334551

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