A Firm Has a Debt-To-Equity Ratio of 1

question 41

Multiple Choice

A firm has a debt-to-equity ratio of 1.0. If it had no debt, its cost of equity would be 12 percent. Its cost of debt is 9 percent. What is its cost of equity if there are no taxes?

• A)21 percent
• B)18 percent
• C)15 percent
• D)16 percent

---

Definitions:

Income Inequality

Describes the uneven distribution of income among individuals in a society, where some earn significantly more than others.

Redistribution Programs

Government policies or initiatives designed to transfer income or wealth from certain groups of individuals to others, often aiming at reducing economic inequalities.

In-kind Transfers

Non-cash goods and services provided by governments or organizations to individuals, such as food assistance or housing.

Food Stamps

Government-issued coupons or electronic benefits that low-income individuals use to buy food.