Your Firm Has a Pre-Tax Cost of Debt of 8

question 302

Multiple Choice

Your firm has a pre-tax cost of debt of 8% and an unlevered cost of capital of 12.5%. Your tax rate is 35% and your cost of equity is 14.34%. What is your debt-equity ratio?

• A) .48
• B) .52
• C) .57
• D) .63
• E) .67

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Definitions:

Cognitive Ability

Refers to the mental capacity for processing information, applying knowledge, and solving problems.

Similar

Having a resemblance in appearance, character, or quantity, without being identical.

Dissimilar

Lacking similarity or being distinctly different in nature, form, or quality.

Frequency Distribution

A statistical representation showing how often different values or ranges of values occur in a dataset.