A fiRm Has a Debt-Equity Ratio of

question 232

Multiple Choice

A firm has a debt-equity ratio of .40, a WACC of 16%, and a yield-to-maturity on its debt of 13%. Ignoring taxes, what is the cost of equity?

• A) 7.8%
• B) 9.6%
• C) 11.8%
• D) 15.2%
• E) 17.2%

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Definitions:

Vaccination

A medical intervention that introduces a substance to stimulate the body's immune response against disease.

Producer Surplus

The discrepancy between what sellers are prepared to take for a product or service and the actual payment they get in the marketplace.

Efficiency Loss

The loss of economic efficiency that occurs when the equilibrium for a good or a service is not achieved or is not achievable.

Franchising

A business model that allows individuals or entities to operate a portion of a larger company's brand or system in exchange for fees and adherence to the company's policies.