A Firm Uses Only Debt and Equity in Its Capital

question 48

Multiple Choice

A firm uses only debt and equity in its capital structure. The firm's weight of debt is 45%. The firm could issue new bonds at a yield to maturity of 10% and the firm has a tax rate of 30%. If the firm's WACC is 12%, what is the firm's cost of equity?

• A) 16.09%
• B) 15.63%
• C) 15.21%
• D) 14.57%

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Definitions:

Continuance Commitment

Continuance commitment refers to an employee's desire to remain in an organization due to the awareness of the costs associated with leaving it.

Financial Incentives

Monetary rewards offered to influence behavior or encourage performance improvements in the workplace.

Employee Wellness Programs

Organized and coordinated programs within organizations aimed at improving health and well-being among employees, often including activities or resources for physical health, mental health, and lifestyle support.

Coping Mechanisms

Psychological strategies that individuals use to manage stress, deal with traumatic events, or navigate difficult emotional circumstances.