If kelly acquires reilly it will increase the debt to 60 at, Ask an Expert

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Kelly Tubes is considering a merger with Reilly Tires. Reilly's market-determined beta is 1.3, and the firm is financed with 20% debt, at an interest rate of 7.5%, and its tax rate is 25%. If Kelly acquires Reilly, it will increase the debt to 60%, at an interest rate of 9.50%, and the tax rate will increase to 35%. The risk-free rate is 6% and the market risk premium is 5%. What will Reilly's required rate of return on equity be after it is acquired?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M941221

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