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

---

Definitions:

F Statistic

A ratio used in statistics to compare the variability between group means to the variability within groups, central in conducting ANOVAs.

Hypotheses

Plural of hypothesis; propositions or sets of propositions put forth to explain certain phenomena, subject to verification or falsification through testing.

Forbes 500 List

An annual ranking by Forbes magazine of the 500 largest corporations in the U.S. based on their revenue.

Partial ANOVA Table

A summary table that shows the results of an ANOVA test, including only a subset of the complete information typically presented.