A Firm Has an Expected Return on Equity of 16

question 58

Multiple Choice

A firm has an expected return on equity of 16% and an after-tax cost of debt of 8%.What debt-equity ratio should be used in order to keep the WACC at 12%?

• A) .50
• B) .75
• C) 1.00
• D) 1.50

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Definitions:

Strategies

Planned methods or approaches designed to achieve specific goals or solve problems.

Families

Groups of related individuals, living together or in close emotional connection, often characterized by shared values, responsibilities, and affection.

Throughput Sector

Part of an economic or production system that processes inputs into outputs, emphasizing the flow of resources.

Decoded

Refers to the process of interpreting or giving meaning to something, such as a message, information, or data, by converting it from a coded form into a more understandable format.