Which of the Following Is the Best Definition of Unlevered

question 50

Multiple Choice

Which of the following is the best definition of unlevered cost of capital (RU) ?

• A) The costs that are directly associated with bankruptcy, such as legal and administrative expenses.
• B) The cost of capital of a firm that has no debt.
• C) Theory that a firm borrows up to the point where the tax benefit from an extra dollar in debt is exactly equal to the cost that comes from the increased probability of financial distress.
• D) The equity risk that comes from the nature of the firm's operating activities.
• E) The tax saving attained by a firm from interest expense.

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Definitions:

Liter

A metric unit of volume equal to 1,000 cubic centimeters or approximately 0.26 US gallons.

Cancer

A group of diseases involving abnormal cell growth with the potential to invade or spread to other parts of the body.

Mcg

Microgram, a unit of measure equal to one millionth of a gram or one thousandth of a milligram.

mL

Milliliter, a unit of volume in the metric system equal to one-thousandth of a liter.