Bigelow SpA Has a Cost of Equity of 13

question 27

Multiple Choice

Bigelow SpA has a cost of equity of 13.56% and a pre-tax cost of debt of 7%.The required return on the assets is 11%. What is the firm's debt-equity ratio based on MM Proposition II with no taxes?

• A).60
• B).64
• C).72
• D).75
• E).80

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Definitions:

Direct Labor Costs

Expenses related to employees who directly contribute to the production of goods or services, such as wages for assembly line workers.

Period Costs

Costs that are expensed in the period they are incurred rather than being capitalized or included in the cost of goods sold, such as selling, general, and administrative expenses.

Selling

The process of promoting and exchanging goods or services for value.

Administrative

Pertaining to the activities involved in the management, governance, or organization of a business, typically those responsible for enforcing policies and making decisions.