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Calculate the expected return on common shareholders equity

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Question 1: BuyUS Inc. plans to issue 7%, $400,000, 10-year bonds in order to finance an expansion. The expansion is expected to increase income before interest expense from $100,000 to $175,000. BuyUS has $1,000,000 in average common equity. Calculate the expected return on common shareholders' equity. (ignore income taxes)

Select one:

A. 14.7%

B. 57.1%

C. 43.8%

D. 20.0%

E. 7.0%

Reference no: EM132494755

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