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Required Rate of Return after Acquired 1 answer below » 7. Kelly Tubes is considering a merger with Reilly Tires. Reilly’s market-determined beta is 1.4, and the firm is financed with 30% 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? Jan 18 2014 02:18 AM