Your Firm Has a Debt-Equity Ratio of

question 67

Multiple Choice

Your firm has a debt-equity ratio of .60. Your cost of equity is 11% and your after-tax cost of debt is 7%. What will your cost of equity be if the target capital structure becomes a 50/50 mix of debt and equity?

• A) 9.50%
• B) 10.50%
• C) 11.00%
• D) 11.25%
• E) 12.00%

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Definitions:

Exchange Rates

The rate at which one currency is exchanged for another.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset over its useful life.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

Sales

The transactions involving the exchange of goods or services for money, contributing to a company's revenue.