A Firm Has Zero Debt and an Overall Cost of Capital

question 15

Multiple Choice

A firm has zero debt and an overall cost of capital of 11.7 percent.The firm is considering a new capital structure with 45 percent debt at an interest rate of 6.8 percent.Assume there are no taxes or other imperfections.What will be the levered cost of equity?

• A)16.47%
• B)14.67%
• C)15.80%
• D)15.71%
• E)16.16%

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Definitions:

Sensory Neuron

A type of neuron that transmits signals from sensory receptors to the central nervous system.

Sensory Neurons

Neurons that transmit sensory information from the body's periphery towards the central nervous system.

Unipolar

Describes neurons with only one extension from the cell body, often found in sensory neurons conveying touch and pain.

Bipolar

Relating to or involving two completely opposites; in psychiatry, it refers to a mental disorder that causes extreme mood swings between depression and mania.