Your Firm Has a Pre-Tax Cost of Debt of 8

question 78

Multiple Choice

Your firm has a pre-tax cost of debt of 8% and an unlevered cost of capital of 13%.Your tax rate is 35% and your cost of equity is 15.26%.What is your debt-equity ratio?

• A).61
• B).66
• C).70
• D).74
• E).78

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Definitions:

Marginal Cost

The financial outlay involved in producing an additional unit of a product or service.

Resources

The total means available for economic and political development, such as minerals, labor, and capital.

Pareto Optimal

A situation in economics where resources are allocated in the most efficient manner, making it impossible to reallocate without making at least one individual worse off.

Trades

The action of buying and selling goods and services, which can occur domestically within a country or internationally between countries.