What is the return on equity for a firm with equal amounts of debt and equity financing, a 6% weighted average cost of capital, a 35% tax rate, and a 3% coupon rate on its debt that is selling at par value?
( Please show calculation an intuition so I can understand how the answer is achieved and also so I can do other similar questions, thanks in advance)
a) 0.98%
b) 5.03%
c) 10.05%
d) 12.75%
e) cannot be determined