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Stephens Electronics Is Considering a Change in Its Target Capital

question 40

Multiple Choice

Stephens Electronics is considering a change in its target capital structure, which currently consists of 25% debt and 75% equity. The CFO believes the firm should use more debt, but the CEO is reluctant to increase the debt ratio. The risk-free rate, rRF, is 5.0%, the market risk premium, RPM, is 6.0%, and the firm's tax rate is 40%. Currently, the cost of equity, rs, is 11.5% as determined by the CAPM. What would be the estimated cost of equity if the firm used 60% debt? (Hint: You must first find the current beta and then the unlevered beta to solve the problem.)

Identify exceptions to the statute of frauds.

Understand the requirements for writings under the Uniform Commercial Code (UCC) and how they differ from common law.

Analyze the concept and purpose of the parol evidence rule.

Understand the practical applications and exceptions to the parol evidence rule.

Definitions:

Stimulus

Anything that triggers a physical or behavioral change in an organism.

Neutral Prompt

A stimulus that does not inherently evoke a response prior to conditioning or learning in the context of behavioral experiments.

Classical Conditioning

A learning process that occurs when two stimuli are repeatedly presented together, leading one to elicit a response once elicited only by the other.

Innate Learning

Knowledge or skills that are present from birth, not acquired through experience or education.