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The firm's tax rate is 34%. The firm's pretax cost of debt is 8%; the firm's debttoequity ratio is 3; the riskfree rate is 3%; the beta of the firm's...

chap 18, #4. pls see attached
The firm's tax rate is 34%. The firm's pre-tax cost of debt is 8%; the firm's debt-to-equity ratio is 3; the risk-free rate is 3%;  the beta of the firm's common stock is 1.5; the market risk premium is 9%. What is the required return on assets? The feedback I was given is: 16.5% =  r asset  + 3 × [  r asset  -  r debt ] × (1-.34) r asset  = 10.85%. The ANS:  10.85% Where does 16.5% come from?  What does rdebt equal?  Basically I need all the steps to solve this  equation.
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Finance-8208168.doc

The firm's tax rate is 34%. The firm's pre-tax cost of debt is 8%; the firm's debt-to-equity
ratio is 3; the risk-free rate is 3%; the beta of the firm's common stock is 1.5; the market
risk...

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