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

question 53

Multiple Choice

A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 9%. Its cost of debt is 7%. What is its cost of equity if the corporate tax rate is 50%?

• A) 10.0%.
• B) 10.75%.
• C) 12.50%.
• D) 7.73%.

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Definitions:

Highly Neurotic

Describes individuals with a tendency towards high levels of emotional instability, anxiety, and stress.

Perceive Events

The process by which individuals interpret and give meaning to events and stimuli in their environment.

Defensive Coping

Psychological strategies employed by individuals to reduce stress and defend against threats to their self-esteem or emotional well-being.

Everyday Problems

Common or routine challenges and obstacles that people encounter in their daily lives.