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Minimum after-tax rate of return

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Hanover Corp. plans to maintain its optimal capital structure of 40 percent debt, 10 percent preferred stock, and 50 percent common stock and retained earnings far into the future. The required rate of return on each component is debt: 8.7 per cent; preferred stock: 11 per cent; common stock and retained earnings: 14 per cent. Assuming a 40 percent marginal tax rate, what is the minimum after-tax rate of return that Action must earn on its investments?

Reference no: EM132554928

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