Longmont Inc

question 22

Multiple Choice

Longmont Inc.is in the property management business and has a required return on its assets of 10%.It can borrow in the debt market at 5%.If there are no taxes and M&M's proposition II holds,what is the cost of equity if there is 10% equity financing and 90% debt financing?

• A)45%
• B)50%
• C)55%
• D)60%

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Definitions:

Personality Traits

Enduring characteristics that describe an individual's behavior, such as introversion or extroversion.

Internal Locus of Control

The belief that one is responsible for their own success and failure; an individual's belief that they can control their life.

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A psychologist who studies how an individual’s understanding and behavior are influenced by the social context and cognitive processes.

Politically Conservative

A political ideology that typically emphasizes tradition, stability, and a degree of skepticism towards radical changes in society.