A Firm Has a Debt-Equity Ratio Of

question 20

Multiple Choice

A firm has a debt-equity ratio of.40, a WACC of 16%, and a yield-to-maturity on its debt of 13%. Ignoring taxes, what is the cost of equity?

• A) 7.8%
• B) 9.6%
• C) 11.8%
• D) 15.2%
• E) 17.2%

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Definitions:

Specialization

The practice of focusing on a limited scope of products or skills to gain efficiency and quality in production.

Orange Production

The cultivation and harvesting process of oranges, often for commercial sale and consumption.

Bushels

A measure of volume commonly used in agriculture, particularly in the United States, for crops like wheat, corn, and soybeans.

Absolute Advantage

The ability of an entity to produce more of a good or service than competitors using the same amount of resources.