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

question 10

Multiple Choice

A firm has a debt-to-equity ratio of 1. Its levered cost of equity is 16 percent, and its cost of debt is 8 percent. If there were no taxes, what would be its cost of equity if the debt-to-equity ratio were zero?

• A)8 percent
• B)10 percent
• C)12 percent
• D)14 percent

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Definitions:

Species

A basic unit of biological classification, defined as a group of organisms capable of interbreeding and producing fertile offspring.

Evolution of Neurons

The historical development of nerve cells (neurons) from non-neuronal precursor cells, critical for the development of nervous systems.

Bilaterians

Organisms that have bilateral symmetry during some stage of their development, including humans, most animals, and insects.