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RE = rA + (D/E)[(1 TC)(rA rD)]I

Question

rE = rA + (D/E)[(1 – TC)(rA – rD)]

I

could use some help figuring out what this formula is meant to do

I believe i know what some of the letters stand for

rE = equity rate of return

D = Debt

E = Equity

TC = Tax rate

I’m not sure what value rA refers to though and I’m not sure what the formula as a whole is meant to solve

Economics