Calculate the Cost of Equity for Boston Industries Using the Following

question 47

Multiple Choice

Calculate the cost of equity for Boston Industries using the following information: The cost of debt is 7%,the corporate tax rate is 40%,the rate on Treasury Bills is 4%,the firm has a beta of 1.1,and the expected return on the market is 12%.

• A)12.8%
• B)12.6%
• C)13.2%
• D)6.6%

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Definitions:

Cash Flow

The entire sum of cash and assets that are equivalent to cash being channeled into and out of a business venue.

Net Income

The total revenue minus expenses, taxes, and costs, representing the profit a company makes during a specific period.

Cash Flow from Operations

The net amount of cash generated by a company's normal business operations, reflecting how well it generates cash to fund its operating expenses and pay its debts.

Corporate Treasurer

A senior executive responsible for managing the company's investments, capital structure, and strategies for financial risk management.