Thompson Feed Has a Cost of Equity of 11

question 115

Multiple Choice

Thompson Feed has a cost of equity of 11.9% and a pre-tax cost of debt of 9%. The required return on the assets is 11%. What is the firm's debt-equity ratio based on M&M II with no taxes?

• A) .40
• B) .45
• C) .50
• D) .55
• E) .60

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Definitions:

Intellectual Stimulation

Engaging with ideas and challenges that encourage innovation and creative problem-solving.

Transformational Leadership

Describes a leadership approach that causes change in individuals and social systems, by inspiring followers to transcend their own self-interests for the good of the organization.

Followers Respect

The admiration and esteem that followers have for their leader, often based on the leader's qualities, actions, and integrity.

Reevaluate Perspectives

The process of reassessing and potentially altering one’s viewpoints or beliefs based on new information or changes in context.