takes the influence of an increase in leverage on the required return of equity into account.13 The reader should know, however, what ru is.
Superstore's r was calculated with the help of the second formula in Exhibit 13. To determine that amount, Superstore needed an E that was valid for a capital structure with 50% debt financing. If the E of the enterprise to be valued is unknown, how is ru determined? In other words, how does one then determine the required return on equity for bearing only business risk