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Armida Inc. is currently an all-equity firm with an expected return on equity of 17%....

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Finance

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Armida Inc. is currently an all-equity firm with an expected return on equity of 17%. It is considering a leveraged recapitalization in which it would borrow and use all the proceeds to repurchase existing shares. Suppose Armida borrows to the point that its debt-to-asset ratio (D/A) is 52%. With this amount of debt, the debt cost of capital is 9%. What will be the expected return on equity after this transaction? Assume perfect capital markets and no taxes. Write the answer as a percentage with two decimals; e.g., 23.55%, but don't write the % sign. (Acceptable error = 0.25%)

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