James Bay Water Park Operates in a World with Zero

question 12

Multiple Choice

James Bay Water Park operates in a world with zero taxes and no financial distress.The firm has a debt/equity ratio of 1.The cost of equity is 15% and the cost of debt is 8%.The only difference between Whispering Pines Resort and James Bay Water Park is that Whispering Pines Resort has a debt/equity ratio of 2.What is the cost of equity for Whispering Pines Resort?

• A)11.5%
• B)13.25%
• C)15.0%
• D)18.5%

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Definitions:

Hepatitis B

A serious liver infection caused by the hepatitis B virus (HBV) that can become chronic and lead to liver failure, cancer, or cirrhosis.

HBV Surface Antigen

A protein found on the surface of the hepatitis B virus; its presence in the blood indicates an active HBV infection.

Neonates

Newborn infants, especially those less than four weeks old.

Mongolian Spots

Benign, flat birthmarks with a blueish or bluish-grey coloration, commonly found on infants and usually fading over time.