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Problem:

The subsequent information is given for Koenig Plc. The before tax rate on debt is 10%, whereas the required return on the equity is 20%. The total amount in employ (equity + debt), V, is Rs 2 million. Of that Rs. 1.4 million represents the market value of its equity and Rs.600, 000 equals market value of its debt.

Required:

Given the firm’s existing set of risky projects compute the rate of return which is demanded by Koenig’s finance providers.

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  • Category:- Accounting Basics
  • Reference No.:- M99715

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