The Pizza Shoppe Has Debt with Both a Face and Market

question 57

Multiple Choice

The Pizza Shoppe has debt with both a face and market value of $24,000 and a coupon rate of 6.4 percent.The expected earnings before interest and taxes are $21,400,the tax rate is 35 percent,and the unlevered cost of capital is 11.4 percent.What is the firm's cost of equity?

• A)13.25%
• B)12.89%
• C)13.92%
• D)12.13%
• E)14.25%

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Definitions:

Posteroanterior

An orientation term in radiology indicating that an x-ray beam passes from the back to the front of the body.

Millicurie

A unit of radioactivity equal to one-thousandth of a curie, measuring the amount of radioactivity.

Computerized Axial Tomography

An advanced imaging procedure that uses X-rays and computer processing to create cross-sectional images of the body, also known as a CT scan.

Magnetic Resonance Imaging

An imaging test that uses a magnetic field and radio waves to create detailed images of the organs and tissues within the body.