APM IncIs in the Property Management Business and Has a Required

question 43

Multiple Choice

APM Inc.is in the property management business and has a required return on its assets of 14%.It can borrow in the debt market at 7%.If there are no taxes and M&M's proposition II holds,what is the cost of equity if there is 30% equity financing and 70% debt financing?

• A)55%
• B)40%
• C)30%
• D)16%

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Definitions:

Universal Causality

The philosophical concept that every event or action results from preceding events in accordance with the laws of nature.

Equal and Opposite Reaction

Newton's third law of motion, which states that for every action, there is an equal and opposite reaction.

Two-World Hypothesis

A philosophical or theoretical postulate suggesting the existence of two distinct realms or worlds, often used to differentiate between the physical and the non-physical (e.g., the material and the spiritual or the ideal).

Skepticism

An attitude of doubt towards claims lacking empirical evidence or inherent plausibility, often requiring critical thinking and questioning before acceptance.