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Cathy’s Tubes is considering a merger with Reilly Tires. Reilly’s market-determined beta is… 1 answer below » Cathy’s Tubes is considering a merger with Reilly Tires. Reilly’s market-determined beta is 1.2, and the firm is financed with 20% debt, at an interest rate of 8%, and its tax rate is 25%. If Kelly acquires Reilly, it will increase the debt to 50%, at an interest rate of 9%, and the tax rate will increase to 35%. The risk-free rate is 6% and the market risk premium is 5%. What will Reilly’s required rate of return on equity be after it is acquired? Sep 17 2015 05:22 PM
