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The CFO has recommended an equity multiplier of 5.10 while the firm's investment banker has recommended an equity mulitplier of 4.00 at least until such time as the company's business has stabililzed. The compnay has 6,000,000 in assets and projects a basic earnings power ratio of 17% for the year. The company's tax rate is 40 percent and it must pay an interest rate of 8 percent on its liabiliites.

What is the difference in the projected return on equity under each of the alternative capital structures being proposed?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92800133

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