PLange Inc

question 87

Multiple Choice

P.Lange Inc.hired your consulting firm to help the company estimate the cost of equity.The yield on Lange's bonds is 7.25%,and your firm's economists believe that the cost of equity can be estimated using a risk premium of 3.50% over a firm's own cost of debt.What is an estimate of Lange's cost of equity from retained earnings?

• A)10.75%
• B)11.18%
• C)11.63%
• D)12.09%

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Definitions:

Complement Good

A product that is typically consumed together with another product, increasing the demand for both.

Substitute Good

A product or service that a consumer can use in place of another product or service.

Elastic Demand

A situation in which the demand for a product or service significantly changes in response to a change in its price.

End-of-aisle Displays

Promotional merchandise displays located at the end of store aisles, designed to attract customer attention and increase product sales.