A Firm Has an Expected Return on Equity of 15

question 113

Multiple Choice

A firm has an expected return on equity of 15% and an after-tax cost of debt of 6%. What debt-equity ratio should be used in order to keep the WACC at 12%?

• A) 0.50
• B) 0.75
• C) 0.67
• D)0.33

---

Definitions:

Batesian Mimicry

Batesian mimicry is a form of mimicry where a harmless species evolves to imitate the warning signals of a harmful species to deter predators.

Warblers

A diverse group of small to medium-sized songbirds, known for their vibrant colors and melodic songs, often found in forests and woodlands.

Chemical Warfare

The use of toxic chemical substances as weapons in military conflicts to harm or kill enemy forces.