Equity ROR - S relationship Risk-Free Rate Time Value of...

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Required Rate of Return on Equity at Different Debt Levels Required Rate of Return on Equity (r S ) Debt/Assets (%) • Only financial risk varies with the debt/asset ratio. • The Hamada equation gives an exact r
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Unformatted text preview: S relationship. Risk-Free Rate: Time Value of Money Plus Expected Inflation Premium for Business Risk Premium for Financial Risk r S r RF...
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