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

question 11

Multiple Choice

A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If the corporate tax rate is.25, what would its cost of equity be if the debt-to-equity ratio were 0?

• A) 11.11%.
• B) 12.57%.
• C) 13.33%.
• D) 16.00%.

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Definitions:

Brightness

The perception of visual light intensity; the quality of being lighted, often quantified in terms of luminescence.

Saturation

The point at which a substance can no longer absorb or dissolve another substance, or in qualitative research, the point at which no new information is found.

Hue

The attribute of colors that enables an observer to classify them as red, green, blue, and so on, often determined by the wavelength of light.

Wavelength

The distance between successive crests of a wave, especially points in a sound wave or electromagnetic wave.