Calculate the Company's Cost of Equity Given the Following Information

question 77

Multiple Choice

Calculate the company's cost of equity given the following information: return on assets 13.25%; return on debt 8.25%; total debt $525,000; total equity $775,000.

• A) 17.74%
• B) 16.64%
• C) 15.54%
• D) 14.44%
• E) 13.34%

---

Definitions:

Present Value

The value today of an anticipated sum of money or sequence of cash flows, when calculated with a certain return rate.

Future Cash Inflows

Future cash inflows are the expected receipts of cash that a business anticipates receiving from operations, investments, or financing activities in the future.

Manufacturing Flexibility

The ability of a production system to quickly adapt to changes in the types and quantities of products demanded.

Qualitative Characteristic

Attributes that contribute to the usefulness of information presented in financial statements, including relevance and reliability.