A fiRm Has a Debt-To-Equity Ratio of 1

question 75

Multiple Choice

A firm has a debt-to-equity ratio of 1.Its cost of equity is 16%, and its cost of debt is 8%.If there are no taxes or other imperfections, what would be its cost of equity if the debt-to-equity ratio were 0?

• A)8%
• B)10%
• C)12%
• D)14%
• E)16%

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