Rosita's Has a Cost of Equity of 12

question 15

Multiple Choice

Rosita's has a cost of equity of 12.41% and a pre-tax cost of debt of 8.5%.The debt-equity ratio is .60 and the tax rate is .34.What is Rosita's unlevered cost of capital?

• A)11.30%
• B)12.33%
• C)13.97%
• D)14.08%
• E)14.60%

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Definitions:

Net Present Value

A calculation of the present value of cash inflows minus the present value of cash outflows over a period of time, used in capital budgeting.

Salvage Value

Salvage value is the estimated resale or scrap value of an asset at the end of its useful life.

Capital Budgeting

The process by which a business evaluates and selects long-term investments that are likely to add value to the company.

Highly Uncertain

Refers to situations or outcomes with a very high level of unpredictability or risk, often due to a lack of information or complex variables.