A Firm Has a Cost of Equity of 13 Percent

question 100

Multiple Choice

A firm has a cost of equity of 13 percent, a cost of preferred of 11 percent, an aftertax cost of debt of 5.2 percent, and a tax rate of 35 percent.Given this, which one of the following will increase the firm's weighted average cost of capital?

• A)Increasing the firm's tax rate
• B)Issuing new bonds at par
• C)Redeeming shares of common stock
• D)Increasing the firm's beta
• E)Increasing the debt-equity ratio

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Definitions:

Tolerate Uncertainty

The ability to remain calm and functional despite not knowing the outcome of a situation or having incomplete information.

Modern Psychologists

Professionals in the field of psychology who apply contemporary theories and research to understand, predict, and treat mental, emotional, and behavioral issues.

Empirical Evidence

Data gathered from direct observation or experimental investigation.

Modify Behavior

The process of changing one's actions or reactions through various techniques, such as reinforcement or punishment, to achieve a desired outcome.