Expected return on the market

by | Jul 27, 2021 | Homework Help

Dauphin Corporation has 15% cost of equity, 40% tax rate, and debt-to-equity ratio of 30%. Fayette Corporation has 35% tax rate and debt-to-equity ratio of 50%. Both Dauphin and Fayette are in the same business of selling automotive parts. If the riskless rate is 8% and the expected return on the market is 13%, find the cost of equity for Fayette.

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