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:

Self-awareness

Self-awareness is the conscious knowledge of one's own character, feelings, motives, and desires, enabling introspection and recognition of one's own emotional state.

Drive

A natural, genetically programmed impulse to achieve an objective or fulfill a desire.

Stomach Contractions

Physical movements of the stomach muscles that aid in the digestion process.

Cannon's Hypothesis

A theory suggesting that emotions originate in the thalamus, which sends signals simultaneously to the cerebral cortex (producing the conscious experience of emotion) and the autonomic nervous system (producing physiological arousal).