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Business, 19.05.2020 19:02 reynamarie3

Higgins OfficeCorp. plans to maintain its optimal capital structure of 40 percent debt, 10 percent preferred stock, and 50 percent common equity indefinitely. The required return on each component source ofcapital is as follows: debt8 percent; preferred stock12 percent; common equity16 percent. Assuming a 40 percent marginal tax rate, what after-tax rate of return must Higgins Office Corp. earn on its investments if the value of the firm is to remain unchanged

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