Buster's Target Debt-To-Equity Ratio Is 0

question 76

Multiple Choice

Buster's target debt-to-equity ratio is 0.65,its cost of equity is 13.7 percent,and its beta is 0.9.The after-tax cost of debt is 5.8 percent,the tax rate is 34 percent,and the risk-free rate is 2.3 percent.What discount rate should be assigned to a new project the firm is considering if the project's beta is estimated at 0.87?

• A)11.08%
• B)9.44%
• C)11.67%
• D)9.67%
• E)10.36%

---

Definitions:

Recessive

Referring to a gene that only influences the expression of a trait when paired with an identical gene.

Dominant

Referring to the most powerful, influential, or significant element or gene in a context or system.

Gene

A unit of heredity made up of DNA occupying a fixed position on a chromosome, which is responsible for the inherited characteristics in living organisms.

Psychosocial Crises

Critical stages in an individual's life when they face significant challenges that can impact their psychological and social development.