What Is the Cost of Equity for a fiRm Where

question 239

Multiple Choice

What is the cost of equity for a firm where the required return on assets is 14%, the cost of debt is 11%, and the target debt/equity ratio is 0.5? Ignore taxes.

• A) 11.0%
• B) 12.5%
• C) 14.0%
• D) 15.5%
• E) 16.0%

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Definitions:

Field Effect Transistor (FET)

An electronic relay switch of which there are two types: N-channel and P-channel. A gate (terminal) is used to alter channel status. Channel allows current to flow or not to flow from the source terminal to the drain terminal. Used on many current truck electronic systems because of their ability to allow a very small current to control a high current.

Gate Channel Resistance

The resistance encountered in the channel of a gate in semiconductor devices, affecting electron flow and the device’s electrical characteristics.

Electronic Relay Switch

A switch that uses an electronic control to open or close a circuit, commonly used in vehicle electrical systems.

Scopemeter

A hand-held device that functions as DMM and an oscilloscope.