The Border Crossing Has No Debt and a Cost of Capital

question 14

Multiple Choice

The Border Crossing has no debt and a cost of capital of 12.2 percent.The shareholders would prefer to earn rate of return of 16.4 percent.What debt-equity ratio will be required to meet the shareholder's preference if the firm pays no taxes and can borrow at 6.2 percent?

• A)67%
• B)33%
• C)54%
• D)46%
• E)70%

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Definitions:

Traditional Authority

The exercise of power as legitimated by long-established cultural patterns and traditions.

Social Inequality

Varied social roles or statuses within a group or society experience unequal levels of opportunities and rewards.

Hunting and Gathering

Refers to a pre-agricultural system of lifestyle where societies rely on hunting wild animals and gathering wild plants for sustenance.

Alienated

Feeling isolated and separated from others or oneself, often resulting from social structures or personal relationships.