Supply plans to maintain its optimal capital structure

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Reference no: EM131179684

Shawhan Supply plans to maintain its optimal capital structure of 30 percent debt, 20 percent preferred stock, and 50 percent common stock far into the future. The required return on each component is: Debt (10 percent), preferred stock (11 percent), common stock (18 percent). Assuming a 40 percent marginal tax rate, what after tax rate of return must Shawhan Supply earn on its investments if the value of the firm is to remain unchanged?

Reference no: EM131179684

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