A Firm Has an Expected Return on Equity of 15

question 72

Multiple Choice

A firm has an expected return on equity of 15% and an after-tax cost of debt of 10%.What debt-equity ratio should be used in order to keep the WACC at 11%?

• A)1.00
• B)2.00
• C)3.00
• D)4.00

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Definitions:

Positively Related

A relationship between two variables where an increase in one variable is associated with an increase in the other.

Value

The importance, worth, or usefulness of something, often determined by its desirability and utility.

Up

A direction or trend indicative of progress, increase, or improvement.

Opposite Directions

Opposite directions refer to the scenario where two or more entities move or act in contrasting pathways or alignments, leading to distinct or divergent outcomes.