What Is the Expected Rate of Return to Equityholders If

question 112

Multiple Choice

What is the expected rate of return to equityholders if the firm has a 35% tax rate,a 10% rate of interest paid on debt,a 15% WACC,and a 60% debt-asset ratio?

• A) 12.50%
• B) 21.25%
• C) 22.50%
• D) 27.75%

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Definitions:

New Deal

A series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the 1930s aimed at restoring economic stability in the United States.

Inflation

A general increase in prices and fall in the purchasing value of money over a period.

Recession

A period of significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Tax Rates

The percentages of income or value of goods that individuals or companies must pay to the government.