(The Following Data Apply to Problems 23 Through 25

question 13

Multiple Choice

(The following data apply to Problems 23 through 25. The problems MUST be kept together.)
The Kimberly Corporation is a zero growth firm with an expected EBIT of $100,000 and a corporate tax rate of 30%. Kimberly uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%.
-What is the firm's cost of equity?
Answer: e
EASY

• A) 21.0%
• B) 23.3%
• C) 25.9%
• D) 28.8%
• E) 32.0%

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Definitions:

Discontinued Operations Section

A section in the financial statements that reports the results of operations that have been discontinued by a company.

Net Of Tax

This refers to the amount left after taxes have been subtracted from the total or the calculation made taking taxes into account.

Income Statement

A financial statement that shows a company's revenues, expenses, and profits or losses over a particular period of time.

Linkage

The connection or relationship between two or more factors, objects, or systems.